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ANNUAL REPORT

(a joint stock limited company incorporated in the People’s Republic of China with limied liability)

2010A

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010

Important NoticeThe Board, Supervisory Committee and the Directors, Supervisors and senior management of the Company warrant that this

annual report does not contain any misrepresentations, misleading statements or material omissions and shall jointly and

severally accept all responsibility for the authenticity, accuracy and completeness of the information contained in this annual

report.

The Annual Report 2010 of Yanzhou Coal Mining Company Limited has been approved by the twentieth meeting of the

fourth session of the Board. All eleven Directors attended the meeting.

There was no appropriation of funds of the Company by the Controlling Shareholder and its subsidiaries in non-operational

activities.

There were no guarantees granted to external parties by the Company which are against the prescribed decision-making

procedures.

Mr. Li Weimin, Chairman of the Board, Mr. Wu Yuxiang, Chief Financial Officer, and Mr. Zhao Qingchun, Head of

Accounting Department, hereby warrant the authenticity and completeness of the financial report in this annual report.

Annual Report 2010 1

ContentsDEFINITIONS 2

Chapter 1 GROUP PROFILE AND GENERAL INFORMATION 4

Chapter 2 BUSINESS HIGHLIGHTS 10

Chapter 3 CHAIRMAN’S STATEMENT 12

Chapter 4 BOARD OF DIRECTORS’ REPORT 18

Chapter 5 CHANGES IN SHARE CAPITAL AND SHAREHOLDERS 44

Chapter 6 DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES 50

Chapter 7 CORPORATE GOVERNANCE 63

Chapter 8 SHAREHOLDERS’ GENERAL MEETING 76

Chapter 9 REPORT OF SUPERVISORY COMMITTEE 77

Chapter 10 SIGNIFICANT EVENTS 79

Chapter 11 INDEPENDENT AUDITOR’S REPORT 100

Chapter 12 CONSOLIDATED FINANCIAL STATEMENTS 102

Chapter 13 AUDITORS’ REPORT (PRC) 108

Chapter 14 FINANCIAL STATEMENTS AND ANNOTATIONS (under PRC CASs) 210

Chapter 15 DOCUMENTS AVAILABLE FOR INSPECTION 329

APPENDIX 330

Yanzhou Coal Mining Company Limited2

DefinitionsIn this Annual Report, unless the context requires otherwise, the following expressions have the following meanings:

“Yanzhou Coal”, “Company” or

“the Company”

Yanzhou Coal Mining Company Limited, a joint stock limited company incorporated

under the laws of the PRC in 1997 and the H Shares, the ADSs and A Shares of which

are listed on the Hong Kong Stock Exchange, New York Stock Exchange Inc. and the

Shanghai Stock Exchange, respectively;

“Group” or “the Group” the Company and its subsidiaries;

“Yankuang Group” or “the

Controlling Shareholder”

Yankuang Group Corporation Limited, a company with limited liability reformed and

established in accordance with PRC law in 1996, being the controlling shareholder of the

Company holding 52.86% of the total share capital of the Company as at the end of the

reporting period;

“Yulin Neng Hua” Yanzhou Coal Yulin Neng Hua Company Limited, a company with limited liability

incorporated under the laws of the PRC in 2004 and a wholly-owned subsidiary of the

Company, mainly engages in the production and operation of the 0.6 million tonnes of

methanol project in Shaanxi province;

“Heze Neng Hua” Yanmei Heze Neng Hua Company Limited, a company with limited liability

incorporated under the laws of the PRC in 2004 and a 98.33% owned subsidiary of the

Company, mainly engages in the development of Juye coal field in Heze city, Shandong

province;

“Shanxi Neng Hua” Yanzhou Coal Shanxi Neng Hua Company Limited, a company with limited liability

incorporated under the laws of the PRC in 2002 and a wholly-owned subsidiary of the

Company, mainly engages in the management of the projects invested in Shanxi province

by the Company;

“Tianchi Energy” Shanxi Heshun Tianchi Energy Company Limited, a company with limited liability

incorporated under the laws of the PRC in 1999 and a 81.31% owned subsidiary of

Shanxi Neng Hua, mainly engages in the production and operation of Tianchi coal mine;

“Tianhao Chemicals” Shanxi Tianhao Chemicals Company Limited, a joint stock limited company

incorporated under the laws of the PRC in 2002 and a 99.89% owned subsidiary of

Shanxi Neng Hua, mainly engages in the production and operation of the 0.1 million

tonnes methanol project in Shanxi province;

“Yancoal Australia Pty” Yancoal Australia Pty Limited, a company with limited liability incorporated under

the laws of Australia in 2004 and a wholly-owned subsidiary of the Company, mainly

engages in the management of the projects invested by the Company in Australia;

“Austar Company” Austar Coal Mine Pty Limited, a company with limited liability incorporated under

the laws of Australia in 2004 and a wholly-owned subsidiary of Yancoal Australia

Pty Limited, mainly engages in coal production, processing, preparation and sales

operations;

“Felix” Felix Resources Limited, a limited company incorporated under the laws of Australia and

a wholly-owned subsidiary of Austar Company, mainly engages in coal mining, sales and

exploration of coal;


Definitions

“Hua Ju Energy” Shandong Hua Ju Energy Co., Limited, a company with limited liability incorporated

under the laws of the PRC in 2002 and a 95.14% owned subsidiary of the Company,

mainly engages in the thermal power generation with gangue and slurry, and heating

supply;

“Ordos Neng Hua” Yanzhou Coal Ordos Neng Hua Company Limited, a company incorporated under the

laws of the PRC in 2009 and a wholly-owned subsidiary of the Company, mainly engages

in the preparation of the construction of the Company’s 0.6 million tonnes methanol

project in Ordos City and the development of coal resources in the Inner Mongolia

Autonomous Region;

“Haosheng Company” Inner Mongolia Haosheng Coal Mining Company Limited, a limited company

incorporated under the laws of the PRC in 2010 and a 51% owned subsidiary of the

Company, mainly engages in the project application and mining rights approvals of

Shilawusu coal field in the Inner Mongolia Autonomous Region;

“Railway Assets” the railway assets specifically used for transportation of coal for the Company, which are

located in Jining City, Shandong province;

“H Shares” Overseas listed foreign invested shares in the ordinary share capital of the Company,

with nominal value of RMB1.00 each, which are listed on the Hong Kong Stock

Exchange;

“A Shares” Domestic shares in the ordinary share capital of the Company, with nominal value of

RMB1.00 each, which are listed on the Shanghai Stock Exchange;

“ADSs” American depositary shares, each representing ownership of 10 H Shares, which are

listed on New York Stock Exchange Inc.;

“PRC” the People’s Republic of China;

“CASs” or “ASBEs” Accounting Standard for Business Enterprises (2006) and the relevant regulations and

explanations issued by the Ministry of Finance of PRC;

“IFRS” International Financial Reporting Standards;

“CSRC” China Securities Regulatory Commission;

“Hong Kong Listing Rules” Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

“Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited;

“Shanghai Stock Exchange” the Shanghai Stock Exchange;

“Articles” the Articles of Association of the Company;

“Shareholders” the shareholders of the Company;

“Directors” the directors of the Company;

“Board” the board of directors of the Company;

“Supervisors” the supervisors of the Company;

“RMB” Renminbi, the lawful currency of the PRC, unless otherwise specified.

“AUD” Australian dollars, the lawful currency of Australia;

“USD” the United States dollars, the lawful currency of the United States;


Group Profile and General InformationChapter 01

France

Switzerland

Italy

Mexico

United State

Brazil

I GROUP PROFILE

The Group’s headquarters are located in Shandong Province, the PRC. The head quarters’ coal resources area are located at Jining and Yanzhou coal fields. The Group also owns coal resources and deep processing coal projects in Heze city in Shandong Province and in Shaanxi Province, Shanxi Province and the Inner Mongolia Autonomous Region, as well as Australia. It is an international mining enterprise that integrates coal, coal chemicals and electricity power production.

Yanzhou Coal is the only Chinese coal enterprise with its shares concurrently listed on three exchanges domestically and abroad. As at the end of the reporting period, the total issued share capital of the Company was 4.9184 billion shares.

In 2010, the Group sold 49.63 million tonnes of salable coal and 0.38 million tonnes of methanol, realizing a net income attributable to the equity holders of the Company of RMB 9.2814 billion, (calculated according to the IFRS), making the Company one of the most profitable coal enterprises in the PRC.

PRINCIPAL BUSINESS

• Coal mining, washing and processing, sales; primarily producing of thermal coal for the electricity power sector, processed metallurgical coal and PCI for the metallurgical sector. Customers are mainly located in Eastern China, Southern China and other countries such as Japan, South Korea and Australia;

• Coal chemicals, mainly the production and sale of methanol; and

• Generation of electricity.


Chapter 01Group Profile and General Information

India

Korea

The Philippines Export market for coal

Development of coal mine

Domestic sales market

Taiwan

Japan

Austar Coal Mine, Australia

Felix Resources Limited

STOCK ISSUANCE

The shares of the Company were successfully listed in New York, Hong Kong and Shanghai with a primary listing of 850 million H Shares (including 2.76 million of ADSs (one ADS was equivalent to 50 H Shares in the primary listing)) and 80 million A Shares in 1998.

The Company issued 100 million additional A Shares and 170 million additional H Shares in 2001.

The Company successfully issued 204 million new H Shares in 2004.

ASSETS ACQUISITION ANDESTABLISHMENT OF SUBSIDIARIES

In 1998, the Company acquired Jining II Coal Mine;

In 2001, the Company acquired Jining III Coal Mine;

In 2002, the Company acquired the Railway Assets;

In 2004, the Company established Yulin Neng Hua; established Yancoal Australia Pty; acquired Austar Coal Mine;


Chapter 01 Group Profile and General Information

PRC Listed Companies” by Finance Weekly.

Awarded “2010 PRC Listed Companies: The Best Corporate Governance Award” by the Corporate Governance Net of China and Corporate Governance Study Center of Nankai University.

Awarded “2010 The Best Public Sentiment Award” by Investor Relationship Management Research Center of PRC listed Companies at the Fifth Session of China Investor Relations Annual Conference organized by Nanjing University.

Awarded “Top 100 Gold Round Table Award” for PRC Listed Companies at the sixth session of the Board of Directors Magazine.

In 2005, the Company acquired Heze Neng Hua;

In 2006, the Company acquired Shanxi Neng Hua;

In 2009, the Company acquired Hua Ju Energy; established Ordos Neng Hua; and acquired Felix.

In 2010, the Company acquired Haosheng Company;

MAJOR AWARDS IN 2010

Awarded “2010 Nominated Award for Information Disclosure” by the Shanghai Stock Exchange.

Selected as “2010 Platts Top 250 Global Energy Companies”, ranked No. 6 in the category of “Global Coal and Consumable Fuel Enterprise” and No. 3 in the category of “Asia Coal and Consumable Fuel Enterprise”.

Awarded “2010 The Best Board of Directors of



Yarrabee coal mine

Ashton coal mine

Moolarben coal mine

Baodian Coal Mine

Xinglongzhuang Coal Mine

Nantun Coal Mine

Jining II Coal Mine

Yanzhou Coal MiningCompany Limited

Wholly-owned subsidiaries

Controlled entities

Jining III Coal Mine

Dongtan Coal Mine

Railway Transportation Department

Branch Company in Zhenjiang

Materials & Goods Supply Centre

Complex Mining Machinery Management Centre

Yancoal Australia Pty Limited

Yanzhou Coal Shanxi Neng Hua Company Limited

Yanzhou Coal Yulin Neng Hua Company Limited

Yanzhou Coal Ordos Neng Hua Company Limited

Austar Coal MinePty Limited

Shanxi Heshun TianchiEnergy Company

Limited

Shanxi Tianhao ChemicalCompany Limited

0.6 million tonnesmethanol project

Zhaolou Coal Mine

Wanfu Coal Mine(under construction)

0.6 million tonnesmethanol project

(under construction)

Anyuan Coal Mine(transfer of rights and

licenses are in progress)

Felix Resources

Limited

Austar Coal Mine

0.1 million tonnes

methanol project

Tianchi Coal Mine

Inner Mongolia HaoshengCoal Minning Co., Ltd

Shandong Hua Ju Energy Co., Ltd

Zhongyan Trading Co., Ltd of Qingdao

Yanmei Heze Neng Hua Co., Ltd

Wholly-owned coal minesand operation branches

Shandong Yanmei Shipping Co., Ltd

Enclosed diagram: Production and Operation Structure of the Group


Chapter 01 Group Profile and General Information

II GENERAL INFORMATION OF THE GROUP

(1) Statutory Chinese Name: 兗州煤業股份有限公司 Abbreviation of Chinese Name: 兗州煤業 Statutory English Name: Yanzhou Coal Mining Company Limited

(2) Legal Representative: Li Weimin

(3) Authorized Representatives of the Wu Yuxiang, Zhang Baocai Hong Kong Stock Exchange: Secretary to the Board/Company Secretary: Zhang Baocai Address: Office of the Secretary to the Board, 298 Fushan South Road, Zoucheng City, Shandong Province, PRC Tel: (86 537) 538 2319 Fax: (86 537) 538 3311 E-mail Address: [email protected] Representative of Huang Xiaolong Shanghai Stock Exchange: Address: Office of the Secretary to the Board, 298 Fushan South Road, Zoucheng City Shandong Province, PRC Tel: (86 537) 538 5343 Fax: (86 537) 538 3311 E-mail: [email protected]

(4) Registered Address : 298 Fushan South Road, Zoucheng City, Shandong Province, PRC Office Address: 298 Fushan South Road, Zoucheng City, Shandong Province 273500, PRC Postal Code: 273500 Official Website: http://www.yanzhoucoal.com.cn E-mail: [email protected]

(5) Newspapers for corporate information China Securities Journal, Shanghai Securities News disclosure in PRC: Website designated by the CSRC for http://www.sse.com.cn publishing A shares annual report: Website designated by the Hong Kong http://www.hkexnews.hk Stock Exchange for publishing H shares annual report: The above annual reports are available at: Office of the Secretary to the Board, Yanzhou Coal Mining Company Limited

(6) Place of A Shares listing: The Shanghai Stock Exchange Stock Code: 600188 Stock Abbreviation: Yanzhou Mei Ye Place of H Shares listing: The Stock Exchange of Hong Kong Limited Stock Code: 1171 Place of ADSs listing: The New York Stock Exchange, Inc. Ticker Symbol: YZC

(7) Date of Initial Business Registration: 25 September 1997 Place of Initial Business Registration: 40 Fushan South Road, Zoucheng City, Shandong Province 273500, PRC Date of Change in Registration: 17 January 2011 Place of Change in Registration: 298 Fushan South Road, Zoucheng City, Shandong Province 273500, PRC Registration number of Corporation 370000400001016 Business Licence of the Enterprise Legal Person : Tax Registration Certificate Number: Jiguoshuizi 370883166122374 Organization Code: 16612237-4



(8) Name of Certified Public ShineWing Certified Public Accountants Accountants (Domestic) : Office Address: 9/F, Block A, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing 100027, PRC Name of Certified Public Grant Thornton Jingdu Tianhua Accountants (International) : Office Address: 20/F, Sunning Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong

(9) Domestic Legal Advisor: King & Wood, PRC Lawyers, Beijing Office Address: 40th Floor, Tower A, Beijing Fortune Center, 7 Dong-sanhuan Zhonglu, Chaoyang District, Beijing, PRC

Hong Kong and US Legal Advisor: Baker & McKenzie Office Address: 14th Floor, Hutchison House, 10 Harcourt Road, Hong Kong

(10) Shanghai Share Registrar: China Securities Depository and Clearing Corporation Limited Address: 36th Floor China Insurance Tower, 166 Lujiazui East Road, Pudong, Shanghai, PRC

Hong Kong Share Registrar: Hong Kong Registrars Limited Address: Room 1712-1716, 17th Floor, Hopewell Center, 183 Queen’s Road East, Hong Kong

Depositary Bank of ADSs: The Bank of New York Mellon Address: BNY Mellon Shareowner Services (P.O. Box 358516 Pittsburgh, PA 15252-8516)

(11) Principal Bankers: Industrial and Commercial Bank of China Limited, Zoucheng Branch Address: Tie Xi Office, 489 Fushan South Road, Zoucheng City, Shandong Province, PRC

China Construction Bank Limited, Yanzhou Coal Mining District Branch Address: 546 Fushan South Road, Zoucheng City, Shandong Province, PRC

Bank of China Limited, Zoucheng Branch Address: 51 Taiping East Road, Zoucheng City, Shandong Province, PRC

(12) Address in Hong Kong: Rooms 2008-12, 20/F the Center, 99 Queen’s Road Central, Hong Kong Contact Person: Law Nga Ting Tel: (852) 2136 6185 Fax: (852) 2136 6068


Business HighlightsChapter 02

I. REVIEW OF OPERATIONS

Percentage of

Increase/ increase and

Unit 2010 2009 Decrease decrease (%)

1. Coal business

Raw coal production kilotonne 49,403 36,295 13,108 36.12

Salable coal production kilotonne 45,533 35,768 9,765 27.30

Salable coal sales volume kilotonne 49,634 38,017 11,617 30.56

2. Railway transportation business

Transportation volume kilotonne 19,736 19,899 –163 –0.82

3. Coal chemicals business

Methanol production kilotonne 367 199 168 84.42

Methanol sales volume kilotonne 376 190 186 97.89

4. Electrical power business

Power generation 10,000 kWh 136,981 138,329 –1,348 –0.97

Electricity sold 10,000 kWh 52,660 56,216 –3,556 –6.33

5. Heat business

Heat generation 10,000 steam tonnes 127 117 10 8.55

Heat sales volume 10,000 steam tonnes 19 14 5 35.71

II. FINANCIAL HIGHLIGHTS(Prepared in accordance with the IFRS)

The financial highlights prepared based on the financial information set out in the audited consolidated income

statements, consolidated balance sheets and the consolidated statements of cash flows of the Group from 2006 to 2010.

(1) OPERATING RESULTS

Year ended 31 December

2010 2009 2008 2007 2006

(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)

Sales income 33,944,252 20,677,138 25,287,423 15,403,731 13,224,296

Gross profit 15,057,631 9,130,357 12,451,493 7,228,720 5,817,278

Interest expenses (603,343) (45,115) (38,360) (27,222) (26,349)

Income before tax 12,477,335 5,685,806 8,865,228 4,543,313 3,726,624

Net income

attributable to equity

holders of the Company 9,281,386 4,117,322 6,488,908 3,230,450 2,372,985

Earnings per Share RMB1.89 RMB0.84 RMB1.32 RMB0.66 RMB0.48

Dividend per ShareNote RMB0.59 RMB0.25 RMB0.40 RMB0.17 RMB0.20

Note: Dividend per share for year 2010 represents the dividend proposed.


Chapter 02Business Highlights

(2) ASSETS AND LIABILITIES

31 December

2010 2009 2008 2007 2006


Net current assets 14,147,492 9,590,547 9,697,406 5,808,755 6,043,863

Net values of property, plant

and equipment 19,874,615 18,877,134 14,149,446 13,524,594 12,139,939

Total assets 72,755,864 62,432,591 32,338,631 26,187,400 23,458,749

Total borrowings 23,015,758 22,509,841 258,000 330,000 380,000

Equity attributable to equity

holders of the Company 37,331,886 29,151,807 26,755,124 21,417,537 18,931,779

Net asset value per share RMB7.59 RMB5.93 RMB5.44 RMB4.35 RMB3.85

Return on net assets (%) 24.86 14.12 24.25 15.07 12.53

(3) SUMMARY STATEMENT OF CASH FLOWS

Year ended 31 December

2010 2009 2008 2007 2006


Net cash from operating activities 5,399,804 6,520,131 7,095,477 4,558,649 3,767,156

Increase (decrease) in cash

and cash equivalents (1,845,074) 180,934 4,082,320 (250,995) (1,149,916)

Net cash flow per share

from operating activities RMB1.10 RMB1.33 RMB1.44 RMB0.93 RMB0.77

Notes:

1. In this annual report, the approach to disclose of sales income has been adjusted. The previous “net sales” (i.e., the

invoiced amount of products sold after deducting the business tax and the surcharges and the transportation expenses)

was adjusted as “sales income” (i.e., the invoiced amount of products sold). The Group also readjusted the item of

“income tax and surcharges”, i.e., the original written-off sales income, was adjusted as sales cost. The abovementioned

adjustments relate to sales income, sales price and cost of sales. The same adjustments have been made to the statistics

of the corresponding period of last year. The attention of the Shareholders and potential investors is drawn to such

adjustments.

2. In year 2009, the Group has since consolidated the financial statements of Hua Ju Energy, Felix and Ordos Neng Hua;

from the year 2006, the Group has since consolidated the financial statements of Shanxi Neng Hua.

3. The operating results and assets of Shandong Yanmei Shipping Co., Ltd. (“Yanmei Shipping”) did not have any material

impact on the Group. Ordos Neng Hua was in the project preparation phase during the reporting period and did not

have any material impact on the operating results of the Group. This annual report does not contain a separate analysis of

the two abovementioned companies.

Mr. Li WeiminChairman


Chairman’s StatementChapter 03

2010 is a year for which the Group fully implemented the strategy of "Second Venture, Rapid Development", leading to a new

historic era for its economic development. Over the past year, facing the complicated domestic and international economic

environment and changing coal market, the Group has achieved a major breakthrough in operating performance and scale

of development as well as a significant increase in sustainable development capacity through enhancing capital operation

on the basis of its strengthened industrial operation. The Board finds the overall work performance during the year of 2010

satisfactory.

The Board proposes to declare a cash dividend payable in accordance with the Company’s persistent dividend policy at a sum

of RMB2,901.9 million (tax inclusive) or RMB0.59 per share (tax inclusive) to the Shareholders for the year 2010.

ACHIEVEMENTS IN 2010

In 2010, the Group’s production of salable coal amounted to 45.53 million tonnes, representing an increase of 27.3%

compared with that of 2009. Sales of coal were 49.63 million tonnes, representing an increase of 30.6% compared with that of

2009. Production of methanol was 0.37 million tonnes, representing an increase of 84.4% compared with that of 2009. Sales of

methanol were 0.38 million tonnes, representing an increase of 97.9% compared with that of 2009. Net income attributable to

the equity holders of the Company amounted to RMB9,281.4 million, representing an increase of 125.4% compared with that

of 2009.


Chapter 03Chairman’s Statement

With the implementation of the production strategy of “Consolidating the Company, Establishing New Ventures and

Overseas Expansion”, the Company’s economies of scale continue to increase and thus accelerate the coal production of

the Company. Increased efforts in relocation of villages located above coal fields, optimizing mining sites and streamlining

production structure give rise to stable production volumes at the coal mines of the Company. By expediting the development

and construction of external coal mines, the production volumes from Yancoal Australia Pty, Shanxi Nenghua Tianchi

Coal mine, Zhaolou Coal Mine of Heze Neng Hua have markedly increased. Through its adaptation to market changes and

adjustment of sales strategies in a timely manner, economies of scale for coal sales were maximized. The Company continued

with the implementation of the “Three Zeroes Project” which mainly comprises of “zero defects in management, zero

impurities in products and zero complaints from customers”. Coal product quality and brand reputation were also enhanced

and income generated from sales of products was increased with total annual sales of externally purchased coal reaching 5.38

million tonnes, representing an increase of 161.3% compared with the corresponding period of last year.

The structure of business development was further optimized. Firstly, capital operation together with acquisition and

integration efforts of coal resources are strengthened by the preliminary establishment of the “Four Key Operating Bases”,

namely Shandong, Yulin of Shaanxi, Ordos City of Inner Mongolia and Australia. The acquisition of the Ordos coal chemicals

project by the Kingboard Group in Hong Kong was completed and the application of additional coal resources is underway.

Coal resource reserve was further enhanced through the acquisition of 51% equity interest in Inner Mongolia Haosheng

Coal Mining Company Limited. The acquisition of the Ordos Anyuan coal mine and the procedure for effecting the change

in permit were underway. Shaanxi Future Energy Chemical Corp. Ltd was established through a joint venture to allow the

Company to participate in the coal to oil development project as well as the construction of compatible coal mines. Secondly,

the construction of key projects were expedited: the Moolarben open-cut coal mine of Yancoal Australia Pty was completed

and has commenced production, with an increase in coal production capacity of 12 million tonnes. The construction of

the comprehensive utilization power plant of Heze Neng Hua Zhaolou has been initiated. Wanfu coal mine and coal plant

selection projects have been approved by the State. Yushuwan Coal Mine in Shaanxi Province is currently in the process of

company establishment. Thirdly, the pre-listing works of Australia assets were accelerated through capital injection to Yancoal

Australia Pty for the purpose of improving its debt to equity structure. The completion of disposing 51% equity interest in

Minerva Coal Mine has taken place. The acquisition of 30% equity interest in Ashton Coal Mine was conducted in an orderly

manner and the variety of coal of Yancoal Australia Pty was further optimized.

The corporate management and control system were further improved. The Company perfected its governance system in a

timely manner in accordance with new regulations relating to domestic and overseas supervision by improving the operational

functions of the Board and leveraging on the professional expertise of independent directors. A nomination committee of

the Board and a strategic development committee were set up. Specific activities in relation to corporate governance are

conducted with a view to improve the standard operation mechanism of listed companies. With a greater awareness in

standardized operation, the Company and the management normalized the control system between parent and subsidiary

companies with an aim to further establish a control system of overseas subsidiaries to strengthen their financial control

and capital management. Subsidiaries in the PRC fully implemented the enterprise resource planning system to proactively

promote the internal control system of the Company, thereby further improving and perfecting its relevant system. According

to the assessment result, the Board is of the view that the internal control system of the Company is sound and has been

implemented effectively, and no major fault was found in the design of the internal control or its implementation during the

reporting period.


Chapter 03 Chairman’s Statement

The Company has achieved harmonious and stable growth by enhancing safety management, equipment and trainings to

ensure employees’ occupational safety and health. The Company recorded a zero fatality rate per million tonnes of raw coal

production for four consecutive years. Austar Company was regarded as the safest coal mine in New South Wales, Australia

for four years in a row. Great emphasize were placed on ecological culture and the development of cyclic economy while

intensive processing and comprehensive utilization of coal products were promoted with great efforts in order to improve

effective use of resources. The Company continued to be named the “Model of Environmental Friendly Coal Mining Area in

China” and was once again named as “Environmentally Friendly Enterprise in China”. The Company endeavors to contribute

to the society and promotes rapid regional economic development, social harmony and stability as well as the through

development of its employees alongside growth in corporate efficiency.

OUTLOOK FOR 2011

Outlook for the coal market

In 2011, coal demand continues to rise while the supply and demand in domestic and international coal market will be

moderately tight.

The supply and demand of coal in the PRC market will remain moderately tight. 2011 is the first year for China to launch

the "Twelfth Five-Year Plan", during which the PRC economy will continue to grow at a relatively fast pace, resulting in a

moderate growth in domestic coal demand. The State will continue its efforts in monitoring the merger and acquisition of coal

mines, further eliminating backward production capacity as planned and closing small coal mines with increasing efforts. In

order to regulate the current development of the coal industry, exercising control over the general production capacity and

production volume of coal has become the State’s mission. Therefore, the growth of coal supply and demand is bound to be

restricted. Following the accelerated development of coal resources in western China and the completion of coal resources

integration in some provinces, the reversal in supply and demand of coal will be more prominent. Coal prices in the PRC will

fluctuate and rise with the supply and demand.

Supply and demand of coal in international market will remain moderately tight. Production volume from coal exporting

countries is very limited. Australia suffered an unprecedented flood throughout history, the coal production and rail transport

of which can hardly return to normal shortly. Other major coal exporting countries including South Africa, Indonesia and

Russia have limited export volumes due to the inadequacies of their rail and ports infrastructures. Vast demand of coal from

China and India will be a key factor in supporting the international coal prices. As Japan was hit by earthquake, its purchases

of coal will drop sharply for the short term, but a large amount of steel, cement and electricity are needed when construction is

due to resume, during which coal demand will exceed normal levels. It is anticipated that international coal price in 2011 will

reach record high.

The average coal selling price of the Group is expected to increase in 2011 as compared with 2010. Currently, the Company

has signed domestic coal sales contracts and letters of intent amounting to 32.365 million tonnes, which includes signed

contracts of 8.995 million tonnes, with a decrease of 1.2% in the average tax-inclusive price compared to that of 2010. Signed

letters of intent of coal sales amounted to 23.37 million tonnes with selling price being adjusted in accordance with changes in

the market.



It is expected that the price of coal products of Yancoal Australia Pty in 2011 will increase substantially compared with the

corresponding period of the previous year. Yancoal Australia Pty has signed a coal sales contract of 2.66 million tonnes for

January to March. The average contract price was US$133.40/tonne.

The coal sales target of the Group for the year 2011 is 54.00 million tonnes, which includes the Company’s sales target of 32.20

million tonnes, Shanxi Neng Hua’s sales target of 1.20 million tonnes, Heze Neng Hua’s sales target of 2.60 million tonnes,

Ordos Neng Hua’s sales target of 1.00 million tonnes, Yancoal Australia Pty’s sales target of 11.00 million tonnes and trading

volume of externally purchased coal targeted to be 6.00 million tonnes.

Outlook for the methanol market in China

In 2011, the situation of supply exceeding demand in the domestic methanol market will continue. It will be difficult to have a

substantial increase in methanol price. The gradual increase in production capacities of the newly built and existing domestic

methanol facilities coupled with an increase in the imports of low cost foreign prime methanol, will lead to a further increase

in the domestic supply of methanol. The demand for methanol remains weak due to overproduction of downstream products

such as methanol, dimethylether and acetic acid. The methanol market is expected to remain stable with the accelerated

elimination of outdated production capacity of methanol and promotion of methanol fuel for vehicles, together with the anti-

dumping duties measures implemented on methanol imported from certain countries by the State. The surge in prices of raw

materials including coal and natural gas, electricity and transportation costs will provide strong support for methanol prices.

The methanol sales target of the Group for 2011 is 0.61 million tonnes, of which 0.55 million tonnes will be from Yulin Neng

Hua and 0.06 million tonnes from Shanxi Neng Hua.

OPERATING STRATEGIES

2011 is the year for which the Group has started to implement the "Twelfth Five-Year Plan", and also consolidated and

thoroughly executed the strategy of "Second Venture, Rapid Development" to leap forward in a new development era. The

Group has established a planning goal of “Double Growth” as its "Twelfth Five-Year Plan" by adhering to its implementation

procedure of "Five-year Plan in Two Steps". “Double Growth” means the Group will strive to double its growth in coal

production to 150 million tonnes, with sales income doubled to over RMB100 billion. "Five-year Plan in Two Steps" means

the milestones to be achieved in stages and its specific implementation measures for the first three years followed by two

years thereafter to realize the "Twelfth Five-Year Plan" target by the Group. During the first three years, it will focus on the

production and construction of existing projects while seeking for acquisition opportunities by means of capital operation,

which lays a strong development foundation for the following two years.

In order to achieve the goals of the “Twelfth Five-Year Plan”, the Group will focus on the following major tasks in 2011:


Chapter 03 Chairman’s Statement

Strengthening production and operation management and improving its economies of scale. Firstly, the Company

will enhance its fundamental safety management and precautionary measures in advance to ensure a sustainable stable

development environment of the Company. Secondly, the Company will thoroughly implement the production strategy of

“Consolidating the Company, Establishing New Ventures and Overseas Expansion” to fully capitalize on coal as the dominant

support in the industry to ensure a new high for total sales volume of coal. Thirdly, the Company will accelerate its integration

into the international marketing system, so as to achieve synergy from international and domestic marketing. In response to

market supply and demand, flexible sales strategies to maximize its profits of coal sales will be implemented. Fourthly, the

Company will strengthen its financial control and establish a global cash management system. With an emphasis on cost

control, the Company will engage in the reduction of costs and energy consumption to ensure effective cost control. The

Company will also further enhance capital budget management, strengthen cash flow control and improve the utilization of

capital.

The development boundary of the Company can be expanded by combining industrial development and capital operation.

Firstly, strategic merger and acquisition of resources were underway. Leveraging on the edges of resources integration at

Yulin, Shaanxi and Ordos City, Inner Mongolia and the increased efforts in merger and acquisition of external resources,

rapid growth in coal production will be achieved. New investment opportunities in coal from overseas markets and related

industries are to be identified. Secondly, working capital efficiency will be improved. Based on the principle of listing

promotion alongside scale expansion, the pre-listing works of Yancoal Australia Pty is underway. Direct financing channels

in different currencies are available by taking advantages of the listing platform, thus providing direct financing at low cost.

By speeding up the capitalization of fully-mechanized top coal caving technique and achieving production targets with the use

of technology and intellectual properties, overall efficiency will be increased. Thirdly, allocation of resources can be improved

by means of capital operation. Through merger and acquisition and reorganization of enterprises with growth potential, the

value of such companies will be enhanced. Non-competitive projects with long-term loss and low efficiency are withdrawal at

a fast pace. Inefficient projects are disposed of so as to ensure capital and personnel resources are concentrated on compelling

projects.

The development and construction of existing projects will be expedited. Project investment and operations management

will be enhanced to eliminate and control investment risks. The Wanfu coal mine of Heze Neng Hua is under development.

The Ashton southeastern open-cut mine of Yancoal Australia Pty has commenced its operation. The preparatory works for

the expansion project of Yarrabee coal mine as well as the preliminary works for Moolarben underground coal mine are

underway. The establishment of the 0.6 million tonnes methanol project has been speeded up. The coal resources of Ordos

Neng Hua is under development while proceeding with the filing works of the mining rights of Shilawusu coal field and Zhuan

Longwan coal field of Inner Mongolia Hao Sheng Coal Mining Limited, accelerating the establishment of Yushuwan Coal

Mine in Shaanxi Province and striving to commence commercial operation as soon as possible.

The Company will strengthen the management and control system and improve the corporate governance system and

operational mechanism to avoid operational risk after listing. It will establish sound internal control system, revise and

manage to implement the "Basic Norms of Internal Control". The control system domestic and foreign subsidiaries will be

enhanced to improve management capacity and profitability. Comprehensive risk management is strengthened to increase the

risk preventive capability of the Company. Informationalized management and control will be enhanced by integrating with

existing information systems to share information resources.

The Company will actively perform its corporate social responsibilities and conduct business in compliance with laws and

protect investors’ interests with honesty and integrity. Through enhanced efforts in resource conservation and environmental

protection, low-carbon economy and the implementation of clean production were achieved and resource utilization



efficiency has been improved. Investments in research and development have been increased to enhance its own innovative

capability. Livelihood of employees is addressed and their legitimate rights and interests are safeguarded. Employees are also

provided with working and living environments which comply with safety and health as well as sanitary requirements. The

harmonious development of the regional economy is promoted by the Company’s active participation in public welfare and

community development.

On behalf of the Board

Li Weimin

Chairman

Zoucheng, the PRC

25 March 2011


Board of Directors’ ReportChapter 04

Mr. Zhang YingminGeneral Manager

I. Management Discussion and Analysis

(1) Management Analysis of the Operating Results by Business Segment

1. Coal business

2. Railway transportation business

3. Coal chemicals business

4. Electrical power business

5. Heat business

(2) Management Analysis of the Major Financial Conditions of the Group

1. Changes in consolidated balance sheet items

2. Changes in consolidated income statement items

3. Changes in consolidated cash flow statement items

4. Others

(3) Capital Expenditure Plan

(4) Operations and Results of the Controlled Companies and Associated Companies of the Group

(5) Investments made by the Group during the Reporting Period

(6) Major Risks faced by the Company, Impacts and Measures

II. Daily Operations of the Board

III. Profit Distribution

IV. Accounting Policies, Changes in Accounting Estimates or Amendments on Significant Accounting Errors

V. Others


Chapter 04Board of Directors’ Report

I. MANAGEMENT DISCUSSION AND ANALYSIS

(1) Management Analysis of Operating Results by Business Segment

The main business operations of the Group were set out in the following table:

Increase/ Increase/ Increase/

Cost of decrease in decrease in decrease in

Sales Income Sales Gross Profit sales income cost of sales gross profit

(RMB’000) (RMB’000) (%) (%) (%) Percentage (%)

1. Coal business 32,590,911 16,473,551 49.45 63.38 59.36 Increase 1.27

2. Railway transportation business 513,282 327,772 36.14 91.99 29.63 Increase 30.72

3. Coal chemicals business 629,290 716,802 –13.91 143.09 103.09 Increase 22.43

4. Electrical power business 185,542 195,536 –5.39 –1.07 2.48 Decrease 3.65

5. Heat business 25,227 12,490 50.49 61.32 28.31 Increase 12.74

1. Coal business

(1) Coal Production

In 2010, the Group produced 49.4 million tonnes of raw coal, representing an increase of 13.11 million

tonnes or 36.1% as compared to last year. The output of salable coal of the Group was 45.53 million

tonnes in 2010, representing an increase of 9.77 million tonnes, or 27.3%, as compared with that of

2009.

The following table sets out the coal production volume of the Group for the year 2010:

Increase/ Percentage of

2010 2009 Decrease increase/

(kilotonne) (kilotonne) (kilotonne) decrease (%)

1. Raw coal production 49,403 36,295 13,108 36.12

1. The Company 34,282 33,359 923 2.77

2. Shanxi Neng Hua 1,462 1,023 439 42.91

3. Heze Neng Hua 1,630 39 1,591 4,079.49

4. Yancoal Australia 12,029 1,874 10,155 541.89

2. Salable coal production 45,533 35,768 9,765 27.30

1. The Company 34,150 33,130 1,020 3.08

2. Shanxi Neng Hua 1,445 1,002 443 44.21

3. Heze Neng Hua 1,180 31 1,149 3,706.45

4. Yancoal Australia 8,758 1,605 7,153 445.67


Chapter 04 Board of Directors’ Report

(2) Coal Prices and Sales

Benefiting from the persistent strong demand for coal in the domestic and overseas markets, the

average coal price of the Group for the year 2010 increased as compared with that of 2009.

The Group sold a total of 49.63 million tonnes of coal in 2010, out of which 1.44 million tonnes were

sold internally, 48.19 million tonnes were sold externally. The sales volume was increased by 11.62

million tonnes or 30.6% as compared with that of 2009, mainly due to: (1) consolidation of saleable

coal of 6.87 million tonnes sold by Felix; (2) the coal sales volume by Heze Neng Hua was increased by

1.06 million tonnes as compared with that of 2009; (3) the sales volume of externally purchased coal

increased by 3.32 million tonnes as compared with that of last year.

In 2010, the Group realized a sales income of RMB32.9303 billion for the coal business, which

represents an increase of RMB12.8134 billion or 63.7% as compared with that of 2009, of which

RMB339.4 million was internal sales income and RMB32.5909 billion was external sales income.

The following table sets out the Group’s sales of coal for 2010:

2010 2009

Sales Sales Sales Sales

volume Sales Price income volume Sales Price income

(Kilotonne) (RMB/tonne) (RMB’000) (kilotonne) (RMB/tonne) (RMB’000)

1. The Company

No. 1 Clean Coal 691 979.30 677,203 694 758.93 526,595

No. 2 Clean Coal 9,002 974.34 8,771,178 8,362 767.10 6,414,420

No. 3 Clean Coal 1,560 829.19 1,293,669 1,717 673.49 1,156,481

Domestic Sales 1,547 829.98 1,283,930 1,636 675.83 1,105,737

Export 13 736.44 9,739 81 626.24 50,744

Lump Coal 1,297 930.54 1,206,479 1,402 739.68 1,036,778

Sub-total of Clean Coal 12,550 952.04 11,948,529 12,175 750.28 9,134,274

Domestic Sales 12,537 952.27 11,938,790 12,094 751.11 9,083,530

Export 13 736.44 9,739 81 626.24 50,744

Screened Raw Coal 16,726 483.42 8,085,586 17,100 430.40 7,359,625

Mixed Coal & others 4,381 294.65 1,290,707 4,055 249.84 1,013,401

Total for the Company 33,657 633.59 21,324,822 33,330 525.27 17,507,300

Domestic Sales 33,644 633.55 21,315,083 33,249 525.02 17,456,556

2. Shanxi Neng Hua 1,498 382.00 572,259 986 293.52 289,547

Screened Raw Coal 1,498 382.00 572,259 986 293.52 289,547

3. Heze Neng Hua 1,079 771.99 832,991 16 528.48 8,291

No. 2 Clean Coal 546 1,105.75 603,254 5 950.46 4,933

Screened Raw Coal 119 524.68 62,577 2 656.42 1,162

Mixed Coal and others 414 403.59 167,160 9 251.57 2,196

4. Yancoal Australia Pty 8,022 774.19 6,210,236 1,627 737.21 1,199,261

Semi-hard coking coal 1,146 910.25 1,043,306 1,627 737.21 1,199,261

Semi-soft coking coal 1,279 939.95 1,202,255 – – –

PCI coal 2,046 925.71 1,893,845 – – –

Thermal coal 3,551 583.25 2,070,830 – – –

5. Sales of externally purchased coal 5,378 741.87 3,989,959 2,058 540.67 1,112,502

6. Total for the Group 49,634 663.46 32,930,267 38,017 529.16 20,116,901



Factors affecting the change of the sales income of coal are analyzed in the following table:

Impact of

Impact of changes in

change in coal the sales

sales volume price of coal

(RMB’000) (RMB’000)

The Company 171,796 3,645,726

Shanxi Neng Hua 150,169 132,543

Heze Neng Hua 561,953 262,747

Yancoal Australia Pty 4,714,321 296,654

Externally purchased coal 1,795,403 1,082,054

The Group’s coal products are mainly sold in markets such as China, Japan, South Korea and

Australia.

The following table sets out the Company’s coal sales in terms of geographical regions for 2010:

2010 2009

Sales volume Sales Sales volume Sales

(Kilotonne) (RMB’000) (Kilotonne) (RMB’000)

1. China 42,859 27,619,700 36,665 19,081,678

Eastern China 32,925 21,861,495 26,814 14,573,130

Southern China 277 251,093 680 340,846

Northern China 1,134 511,863 754 254,347

Other regions 8,523 4,995,249 8,417 3,913,355

2. Japan 2,308 1,920,035 518 479,821

3. South Korea 3,261 2,348,954 354 235,231

4. Australia 628 482,233 57 44,803

5. Others 578 559,345 423 275,368

6. Total for the Group 49,634 32,930,267 38,017 20,116,901



Most of the Group’s coal products were sold to the electricity, metallurgy and chemical industries.

The following table sets out the Group’s coal sales volume by industry for 2010:

2010 2009

Sales volume Sales Sales volume Sales

(Kilotonne) (RMB’000) (Kilotonne) (RMB’000)

1. Electricity 16,138 7,493,814 14,203 5,845,403

2. Metallurgy 5,927 5,200,229 2,764 2,085,357

3. Chemical 1,459 1,405,249 3,740 2,764,266

4. Others 26,110 18,830,975 17,310 9,421,875

5. Total for the Group 49,634 32,930,267 38,017 20,116,901

(3) The Cost of Sales of Coal

The Group’s cost of sales of coal in 2010 was RMB16.4736 billion, representing an increase of

RMB6.1364 billion, or 59.4% as compared with that of 2009.

The following table sets out the main cost of coal sales according to the business entity:

Percentage of

Increase/ increase and

Unit 2010 2009 Decrease decrease (%)

The Company

Total cost of sales RMB’000 8,712,668 8,675,793 36,875 0.43

Cost of sales per tonne RMB/tonnes 258.87 260.30 –1.43 –0.55

Shanxi Neng Hua

Total cost of sales RMB’000 373,902 250,357 123,545 49.35

Cost of sales per tonne RMB/tonnes 249.59 253.79 –4.20 –1.65

Heze Neng Hua

Total cost of sales RMB’000 711,802 36,231 675,571 1,864.62

Cost of sales per tonne RMB/tonnes 659.68 2,309.39 –1,649.71 –71.43

Yancoal Australia Pty

Total cost of sales RMB’000 3,154,710 638,357 2,516,353 394.19

Cost of sales per tonne RMB/tonnes 393.28 392.41 0.87 0.22

Externally purchased coal

Total cost of sales RMB’000 3,955,603 1,077,538 2,878,065 267.10

Cost of sales per tonne RMB/tonnes 735.52 523.59 211.93 40.48

During the reporting period, Zhaolou Coal Mine of Heze Neng Hua commenced operation less than a year and

has not achieved the designed production capacity and the unit fixed cost was fairly high.



2. Railway Transportation Business

In 2010, the transportation volume of the Company’s Railway Assets was 19.74 million tonnes,

representing a decrease of 0.16 million tonnes or 0.8% as compared with that of 2009. Income from railway

transportation services of the Company (income from transported volume settled on the basis of off-mine

prices and special purpose railway transportation fees borne by customers) was RMB513.3 million in 2010,

representing an increase of RMB245.9 million or 92% as compared with that of 2009. This was mainly

caused by the increase in special purpose railway transportation fees from RMB0.32/tonne kilometer to

RMB0.57/tonne kilometer from 1 January 2010. The transported volume of railway with transportation

fees borne by customers was increased by 0.98 million tonnes or 5.7%. The cost of railway transportation

business was RMB327.8 million, representing an increase of RMB74.913 million or 29.6%.

3. Coal Chemicals Business

The following table sets out the operation situation of the Group’s methanol business for 2010:

Production volume (Kilotonne) Sales volume(Kilotonne)

Increase/ Increase/

2010 2009 decrease (%) 2010 2009 decrease (%)

1. Yulin Neng Hua 311 190 63.68 319 178 79.21

2. Shanxi Neng Hua 56 9 522.22 57 12 375.00

Sales income (RMB’000) Cost of Sales (RMB’000)

Increase/ Increase/


1 Yulin Neng Hua 523,463 239,626 118.45 653,488 344,416 89.74

2 Shanxi Neng Hua 105,827 19,241 450.01 111,659 32,699 241.48

Note: The 0.6 million tonnes methanol project of Yulin Neng Hua commenced production in August 2009 and has not

achieved the designed production capacity in 2010. In 2010, the 0.1 million tonnes methanol project of Shanxi

Neng Hua had not yet commenced normal operations due to raw material supply shortage of coke oven gas.



4. Electricity Business

The following table sets out the operation situation of the Group’s electricity business for 2010:

Generation (10,000 kWh) Electricity sold (10,000 kWh)

Increase/ Increase/


1 Hua Ju Energy 109,035 105,121 3.72 46,957 41,215 13.93

2 Yulin Neng Hua 21,260 22,923 –7.25 4,959 4,716 5.15

3 Shanxi Neng Hua 6,686 10,285 –34.99 744 10,285 –92.77

Sales income (RMB’000) Cost of Sales (RMB’000)

Increase/ Increase/


1 Hua Ju Energy 172,675 152,144 13.49 165,156 123,246 34.01

2 Yulin Neng Hua 11,124 11,285 –1.43 25,445 18,666 36.32

3 Shanxi Neng Hua 1,743 24,112 –92.77 4,935 48,891 –89.91

Note: From 1 January 2010, the public generator sets of Shanxi Neng Hua have been changed into self-contained

generator sets. The electricity generated by Shanxi Neng Hua and Yulin Neng Hua mainly provides for the

methanol projects and the remaining is sold on the grid.

5. Heat Business

Hua Ju Energy generated heat energy of 1.27 million steam tonnes and sold 0.19 million steam tonnes in

2010, generating sales income of RMB25.227 million, with the cost of sales at RMB12.49 million.



(II) Analysis of Major Financial Conditions by the management

1. Changes in Consolidated Balance Sheet Items

(1) Asset

As at 31 December

2010 2009

Percentage

of increase

and

decrease Main reasons for change

(RMB’000) (RMB’000) (%)

Bank balances and cash 6,771,314 8,522,399 –20.55 Payment of investment deposit.

Bank guarantee deposits 2,567,722 3,216,697 –20.18 Decrease in term deposits.

Restricted cash 1,451,183 553,775 162.05 An increase of RMB1.2881 billion in

restricted cash due to the disposal of

equity interest in Minerva coal mine;

a decease of RMB244.8 million of

letter of credit.

Bills receivable and accounts receivable 10,017,260 4,723,922 112.05 An increase of RMB5.2397 billion in

the balance of bills receivable due to

the increase of the sales of coal settled

with acceptance bills.

Inventories 1,646,116 886,360 85.72 An increase of RMB693.3 million in

the inventory of coal products.

Prepayments and other receivables 2,613,686 1,868,229 39.90 An increase of RMB421.4 million in

the balance of the prepaid removal/

relocation costs relating to future

exploitation, compared to that at the

beginning of the year. An increase of

RMB167.6 million in the balance of

prepayment compared to that at the

beginning of the year.

Derivative financial instrument 239,476 37,760 534.21 An increase of RMB201.7 million

in the fair value measured financial

assets from the forward foreign

exchange contracts signed by Yancoal

Australia Pty.

Taxes receivable 169,013 59,978 181.79 RMB100.7 million in the income tax

pre-paid by Yancoal Australia Pty.

Cost of removal of overburden in

open-cut mines

149,351 350,676 –57.41 A decrease of RMB201.3 million

in the paid but not amortized

overburden in advance by Yancoal

Australia Pty, compared to that at the




As at 31 December

2010 2009

Percentage

of increase

and


(RMB’000) (RMB’000) (%)

Deposits made on investment 3,243,679 175,021 1,753.31 The Company has paid deposits of

RMB2.0458 billion and RMB1.08

billion for the acquisitions of equity

interest in Haosheng Company and

assets of Anyuan coal mine.

Total assets 72,755,864 62,432,591 16.54 –

(2) Liabilities

As at 31 December

2010 2009

Percentage

of increase

and


(RMB’000) (RMB’000) (%)

Provision for land subsidence,

restoration, rehabilitation

and environmental costs

2,453,231 1,608,808 52.49 An increase of RMB844.4 million

in the accrued but unpaid balance

of the land subsidence, restoration,

rehabilitation and environmental

costs, compared to that of at the


Amounts due to the Controlling

Shareholder and its subsidiaries

438,783 757,882 –42.10 The Company has paid the debt due

to the Controlling Shareholder.

Borrowings due within one year 614,925 1,598,113 –61.52 Yancoal Australia Pty has paid the

bank loan of RMB569.8 million.

A decrease of RMB574 million in

the balance of finance lease payable

compared to that at the beginning of

the year.

Derivative financial instrument 166,178 28,333 486.52 An increase of RMB137.8 million

in the fair value measured financial

liability from the forward foreign

exchange contracts and interest rate

swaps signed by the Group.

Tax payable 1,231,388 647,190 90.27 An increase of RMB584.2 million of

tax payable.

Deferred tax liability 2,601,207 1,785,087 45.72 An increase of RMB811.2 million

of deferred tax liability of Yancoal

Australia Pty.

Total liabilities 35,317,413 33,178,298 6.45 –



2. Changes in Consolidated Income Statement Items

As at 31 December

2010 2009

Percentage

of increase

and


(RMB’000) (RMB’000) (%)

Sales income 33,944,252 20,677,138 64.16 The sales income of coal business

increased by RMB7.1247 billion

compared to that of the previous

year due to the increase in the sales

volume of coal; the sales income

of coal business increased by

RMB5.5185 billion as compared to

that of the previous year due to the

increase in the sales price of coal; the

sales income of methanol increased

by RMB370.4 million as compared

to that of the previous year; the

sales income of rail transportation

increased by RMB245.9 million as

compared to that of the previous

year.

Cost of sales 17,726,151 11,143,470 59.07 The cost of coal sales increased by

RMB6.1364 billion compared with

that of last year. It was mainly due to

the increase of coal sales. Sales cost of

the methanol business increased by

RMB363.9 million as compared with

that of last year.



As at 31 December

2010 2009

Percentage

of increase

and


(RMB’000) (RMB’000) (%)

Selling, general and

administrative expenses

5,093,904 3,820,241 33.34 The selling, general and

administrative expenses of the

Company increased by RMB479.8

million as compared with that of last

year, which was mainly due to the

increase of provision of impairment

of assets, employee welfare, wage and

related expenses.

The selling, general and

administrative expenses of Yancoal

Australia Pty increased by RMB747.4


year, which was mainly due to the

consolidation of Felix.

Investment Return on associates 8,870 109,786 –91.92 Accounted under equity method,

the investment return from Huadian

Zouxian Power Generation Company

Limited decreased by RMB103


year.

Other income 3,108,081 311,019 899.32 An exchange gain of RMB2.6882

billion and an earning of RMB117.9

million from the disposal of equity

interest in Minerva coal mine by

Yancoal Australia.

Interest expenses 603,343 45,115 1,237.34 The interest expenses of the bank

loan o f Yancoa l Austra l ia Pty

increased by RMB575.2 million as

compared with that of 2009; the

bill discounting expenses of the

Company decreased by RMB10.97

million as compared with that of

2009.

Income taxes 3,171,043 1,553,312 104.15 Taxable income payable increased as

compared with that of 2009.



3. Changes in Consolidated Cash Flow Statement Items

As at 31 December

2010 2009

Percentage

of increase

and


(RMB’000) (RMB’000) (%)

Net cash inflow from operating businesses 5,399,804 6,520,131 –17.18 Net cash inflow incurred by the

operating activities decreased by

RMB109.8 million as compared to that

of 2009; income tax payment increased

by RMB441.9 million compared to

that of 2009; interest expense payment

increased by RMB574.2 million

compared with that of 2009.

Net cash outflow from investing activities 5,884,355 24,842,938 –76.31 Acquisition of assets decreased by RMB

16.9364 billion as compared to that of

2009; the disposal of equity interest in

Minerva coal mine generated net cash

inflow of RMB1.1478 billion; changes in

bank guarantee deposits resulted in an

increase of net cash flow of RMB2.6203

billion; cash outflow in purchases of

property, plant and equipment increased

by RMB1.4424 billion; changes in

restricted cash resulted in an increase of

net cash flow of RMB442.1 million.

Net cash inflow from financing activities –1,360,523 18,503,741 –107.35 Bank loan deceased by RMB19.7256

billion compared with that of the

previous year; bank loan repaid by

Yancoal Australia Pty increased by

RMB1,051.3 million as compared to that

of 2009; distribution of cash dividends

decreased by RMB737.8 million as

compared to that of 2009.

Net increase in cash and cash equivalents –1,845,074 180,934 –1,119.75 –



4. Others

(1) Debt to Equity Ratio

As at 31 December 2010, the equity attributable to the equity holders of the Company and the total

amount of borrowings amounted to RMB37.3319 billion and RMB23.0158 billion, respectively, with a

debt to equity ratio of 61.7%.

For detailed information on the debt borrowings, please refer to note 35 of the financial statements

prepared under IFRS or notes VIII.20, VIII.28 and VIII.29 of the financial statements prepared under

CASs.

(2) Capital Resources and Use

In 2010, the Group’s principal source of capital was the cash flow from operations and bank loans.

The Group has utilized its capital mainly for the payment of operating expenses, purchase of property,

machinery and equipment, payment of dividends to the Shareholders, part payment of the acquisition

of 51% equity interests in Haosheng Company and Anyuan coal mine and the investment in the

associated accompany, Yankuang Group Finance Company Limited.

Pursuant to the “Acquisition Agreement of Jining III Coal Mine”, during the reporting period, the

Company paid a total of RMB13.248 million to the Controlling Shareholder for the mining rights

of Jining III Coal Mine. As at the reporting period, a total of RMB132.5 million payable to the

Controlling Shareholder by the Company for the mining rights of Jining III Coal Mine has been paid

in full.

The Group’s capital expenditure for the purchase of property, plant and equipment for the year 2010

was RMB3.5621 billion, representing a decrease of RMB2.8257 billion or 44.2% as compared with

RMB6.3878 billion in 2009, which was mainly due to: (1) the capital expenditure of Yancoal Australia

Pty for the purchases of property, plant and equipment decreased by RMB1.6282 billion as compared

with that of 2009; (2) the capital expenditure of Hua Ju Energy for the purchases of property, plant

and equipment decreased by RMB789.8 million as compared with that of the previous year; (3) the

capital expenditure of Heze Neng Hua for the purchases of property, plant and equipment decreased

by RMB390.3 million as compared with that of 2009.

(3) The Impact of Exchange Rate Changes on the Company

China implements the regulated and managed floating exchange rate system based on market supply

and demand by reference to a basket of currencies.

The impacts of exchange rate fluctuations on the Group were mainly reflected in:

(i) the overseas coal sales income as the overseas coal sales of the Group are calculated in U.S.

dollars and Australian dollars;



(ii) the exchange gains and losses of the foreign currency deposits and borrowings. The exchange

rate of AUD to USD was 1.0163 as at 31 December 2010, as compared to that of 0.8985 as at

31 December 2009. Affected by the change of exchange rate: Yancoal Australia Pty had gains

of foreign exchange of RMB2.6882 billion during the report period. As at 23 March 2011, the

exchange rate of AUD to USD was 1.0101.

(iii) the cost of imported equipment and accessories of the Group.

To manage the foreign currency risk arising from the expected revenue, Yancoal Australia Pty, the

Group’s subsidiary in Australia, has entered into foreign exchange hedging contracts with a bank. For

details, please see Note 36 of the Financial Statements prepared under IFRS.

Save as disclosed above, the Group did not take foreign exchange hedging measures on other foreign

currencies and did not plan to further hedge the exchange rate between RMB and foreign currencies.

(4) Contingent liabilities

For details of the contingent liabilities, please see Note 52 of the Financial Statements prepared under

the IFRS.

(5) Taxation

In 2010, pursuant to the Enterprise Income Tax Law of the People’s Republic of China, the Company

and all its subsidiaries incorporated in the PRC are subject to an income tax rate of 25% and Yancoal

Australia Pty Limited is subject to a tax rate of 30% on its taxable profits.

(III) Capital Expenditure Plan

The Group’s capital expenditure for the year 2011 is expected to be RMB5.1031 billion, which is intended to be

made out of the Group’s internal resources and bank loan.

The capital expenditure for the year 2010 and the estimated capital expenditure for the year 2011 of the Group are

set out in the following table:

2011 (Estimated) 2010

(RMB million) (RMB million)

The Company 1,200.4 1,210.4

Shanxi Neng Hua 38.1 14.5

Yancoal Australia Pty 1,636.8 2,093.5

Yulin Neng Hua 44.9 59.4

Heze Neng Hua 720.5 134.8

Hua Ju Energy 67.7 41.6

Ordos Neng Hua 1,353.5 7.9

Haosheng Company 41.2 –

Total 5,103.1 3,562.1



The Group possesses relatively sufficient cash and financial facility such as bank loans, which is expected to meet

the its operation and development requirements.

(IV) Operations and Results of the Controlled Companies and Associated Companies of the Group

Unit: RMB’000

Registered Capital Total asset as Net assets as Net Profit

contributed at 31 December at 31 December for the

Name of Company Nature of Business Main Products or Services Registered Capital by the Company 2010 2010 year 2010

1. Controlled companies

Yulin Neng Hua Energy and chemicals Construction and operation of 1,400,000 1,400,000 3,297,306 572,165 –353,391

the Company’s investment in the

0.6 million tonnes methanol project

Shanxi Neng Hua Investment Management of the Company’s 600,000 600,000 973,018 261,052 –62,568

management investment project in Shanxi province

Heze Neng Hua Energy Development of coal resources 3,000,000 2,950,000 3,889,569 2,698,368 –35,502

in Juye Coal Field

Ordos Neng Hua Energy and chemicals Development of coal resources in 500,000 500,000 1,598,886 482,516 –16,483

Inner Mongolia Autonomous Region

and the establishment of the 0.6

million tonnes methanol project

Yancoal Australia Pty Investment Management of the Company’s AUD64 million AUD64 million 30,552,452 3,817,809 2,663,458

management investment projects in Australia

Hua Ju Energy Electricity Thermal power generation and 288,590 274,590 817,829 740,823 108,648

supply of heat

Yanmei Shipping Transportation Shipping by river, sale of coal 5,500 5,060 35,452 17,547 6,128

of goods and other products

Zhong Yan Trading International trading International trade, product processing, 2,100 1,100 8,686 7,554 55

Co., Ltd commodity exhibition, trade between

domestic industries and storage

2. Associated company

Huadian Zouxian Power Electricity Fire power generation and sales 3,000,000 900,000 6,486,344 3,159,520 22,559

Generation Company on the grid

Limited

Yankuang Group Finance Finance services Acceptance of deposits from members, 500,000 125,000 6,144,686 508,410 8,410

Company Limited inter-bank borrowing, notes acceptance

and discounting for members



Net profit of Yancoal Australia accounted for more than 10% of the Group.

During the reporting period, Yancoal Australia Pty’s sales income of coal was RMB6.2102 billion, gross profit was

RMB3.0555 billion, and net profit was RMB2.6635 billion.

The net profit of Yancoal Australia Pty increased by RMB2.4163 billion or 977.4%, mainly due to: (1) the

incorporation of the net profit of Felix of RMB731.8 million; (2) as affected by the fluctuations of the foreign

exchange rate between AUD and USD, Yancoal had gains of foreign exchange of RMB2.6882 billion, which

contributed to an increase in the net profit by RMB1.8817 billion.

For the details of the operation of Yancoal Australia Pty, please see the section headed “(1). Management Analysis

of Operating Results by Business Segment” under this Chapter.

(V) Investment Made by the Group during the Reporting Period

There were no fund raising activities during the reporting period and no previous funds raised were used in the

reporting period.

Investments of the Group with its own funds during the reporting period are as follows:

Project Name Major Operating activity Project Amount

Interest in

Investee

Company

(%) Progress of the Project

Income from

the Project

Acquisition of 51% equity

interests in Haosheng

Company and the

subsequent capital

increase

Application and approval

of mining rights for

Shilawusu coal mine

zone project in the

Inner Mongolia

The total amount was

RMB6.7000 billion,

of which RMB2.0458

billion has been paid

as at the end of the

reporting period

51.00 Completed the relevant share

ownership transfer procedures

on 4 November 2010

–

Acquisition of Anyuan coal

mine

Production and sales of

coal

The total amount was

RMB1.435billion,

of which RMB1.08

billion has been paid

as at the end of the

reporting period

100.00 As at the disclosure date of this

report, the transfer registration

procedures for mining rights

licence and operating assets

of Anyuan coal mine are in

progress

–

Capital investment in

Yankuang Group Finance

Company Limited

Acceptance of deposits

from member

companies, inter-

bank borrowing,

notes acceptance

and discounting for

members, etc

RMB125 million 25.00 Yankuang Group Finance

Company commenced

business on

1 November 2010

In 2010, Yankuang

Group Finance

Company

Limited achieved

a net income of

RMB8.41 million



During the reporting period, the total capital invested by the Group was RMB3.2508 billion, representing a

decrease of RMB18.4434 billion or 85.0% as compared with RMB21.6942 billion in 2009.

(VI) Major Risks faced by the Company, Impact and Measures

1. Risk arising from talents/technology support

Key talents and technology are the basis for the Company to achieve external development and extension of

the coal industry chain. Following the consolidation and implantation of the Company’s strategy of “Second

Pioneering and Accelerating Development”, the optimization and upgrading the Company’s industrial

structure and accelerated internationalization, the implementation of the external coal mine development

and coal chemical projects may be affected by problems associated with inadequate key talent and technical

supports.

Counter-measures: In response to the risks associated with inadequate professional support, the Company

will strengthen the training of reserve talent through internal training and taking full advantage of social

resources and by formulating and implementing human resources strategy. Responding to the risk

associated with technology shortage upon entry into a new region and entry into the coal chemical industry,

the Company will further increase the investment in science and technology, encourage technological

innovation and rapidly upgrade the Company's technological level and R & D capabilities.

2. Risk arising from product price volatility

Affected by factors such as the macro-economy environment, product prices carry the risks of volatility, and

such volatility would have a direct impact on the operating results of the Group.

Counter-measures: Continuously enhance the ability to analyze the market and the ability to respond to

market change; further improve the international integration of product marketing system and flexibly

adjust its marketing strategies to ensure maximum benefit.

3. Risk arising from exchange rate fluctuation

The uncertainty of exchange rate will affect the operation results of the Group. The Group is exposed to the

risk of frequent and significant fluctuation of exchange rate between Australian dollar and U.S. dollar, which

may result in large foreign exchange gains or losses to Yancoal Australia Pty and affect the book profit.

Counter-measures: strengthen the training of high calibers in foreign exchange management, establish

exchange rate risk pre-warning mechanism and effectively manage exchange rate risk through various

financial tools and instrument.



4. Risk arising from production safety

In view of the State’s requirements on the safe production management of underground mines becoming

increasingly stringent and the high risk nature of the coal and coal chemical industries, safety production

risk remains the most significant risk faced by the Group.

Counter-measures: Further establish and perfect long-term production safety mechanism, enhance the

allocation of safety production responsibility, implementation of safety risk control management as well as

basic safety management, increase the investment in safety production, strengthen safety supervision and

evaluation to achieve safe production.

5. Risk arising from public relations

The regulatory requirements of both domestic and overseas regulatory authorities are becoming increasingly

stringent; the coordination by the Group regarding the relocation of villages above coal fields with interested

parties including the local governments are becoming more and more difficult. The Group would be

adversely affected upon occurrence of public relations risk.

Counter-measures: Firstly, strictly comply with all regulatory requirements and operate in a more regulated

manner; secondly, enhance information disclosure; thirdly, make proper routine communications with

investors; fourthly, strengthen communication with the local governments and obtain the understanding

and support from governments and authorities at all levels.

II DAILY OPERATIONS OF THE BOARD

(I) Board Meetings

Six meetings were held by the Directors during the reporting period:

Session and Number of meeting Date of meeting Disclosure date

1 The twelfth meeting of the fourth session of the Board 4 January 2010 4 January 2010

2 The thirteenth meeting of the fourth session of the Board 26 February 2010 26 February 2010

3 The fourteenth meeting of the fourth session of the Board 23 April 2010 23 April 2010

4 The fifteenth meeting of the fourth session of the Board 20 August 2010 –

5 The sixteenth meeting of the fourth session of the Board 22 October 2010 –

6 The seventeenth meeting of the fourth session of the Board 30 December 2010 30 December 2010



Note: At the fifteenth meeting of the fourth session of the Board, only one proposal regarding the report for the third quarter

of 2010 was considered, which was exempted from disclosure according to relevant regulations. The 2010 interim

report and the acquisition of 51% equity interest in Haosheng Company were considered at the sixteenth meeting of the

fourth session of the Board. As the proposed acquisition was in relation to public auction of state-owned assets and was

subject to confidentiality and in order to protect the interests of the Company and its shareholders, the Company made

application to the stock exchange for exemption from immediate disclosure and publication. On 7 September 2010, the

Company published the announcement of “Acquisition of Equity Interests in Inner Mongolia Haosheng Coal Mining

Company Limited”.

(II) The Implementation by the Board of Shareholders’ Resolutions

During the reporting period, the Board exercised its powers in accordance with the resolutions authorized by the

general meetings, and strictly complied with the PRC Company Law and the Articles.

1. According to the resolutions of the first 2010 extraordinary general meeting held on 26 February 2010,

the Board has completed the re-election of the directors and consequential amendments to the Rules of

Procedures for the Board of the Company and the Rules of Procedures for the Supervisory Committee of the

Company.

2. According to the 2009 annual general meeting of the Company held on 25 June 2010, the Board completed

the following work:

(1) implemented the Profit Distribution Plan for 2009 and distributed to the Shareholders cash dividends

at RMB0.25 (tax inclusive) per share in a total amount of RMB1.2296 billion (tax inclusive);

(2) paid the 2009 annual remuneration to the Company’s auditors; and

(3) expand the business scope of the Company and amend the Articles. Please refer to paragraph headed

“IX. Expansion of Business Scope” under “Chapter 10 Significant Events” of this annual report.

(III) Report of Performance of the Audit Committee

The Company set up the Audit Committee of the fourth session of the Board (the “Audit Committee”) after

the approval of the first meeting of the fourth session of the Board held on 27 June 2008. The Audit Committee

comprises four independent non-executive Directors, namely, Mr. Zhai Xigui, Mr. Pu Hongjiu, Mr. Li Weian and

Mr. Wang Junyan and two non-executive Directors, namely, Mr. Chen Changchun and Mr. Dong Yunqing. Mr.

Zhai Xigui serves as the Chairman of the Audit Committee.

The Audit Committee’s main responsibilities include, proposing the appointment or replacement of external

audit agencies, reviewing the Company’s accounting policies, procedures for disclosing financial information and

preparation of financial reports, and reviewing the internal control system and risk management system of the

Company.

During the reporting period, the Audit Committee conscientiously fulfilled the responsibilities specified in the

Working Rules of the Audit Committee of the Board of Directors of the Company and conducted various tasks in

a strict and regulated manner. The Audit Committee has already reviewed the interim results of the Company for

the year 2010 and the final results of the Company for the year 2010, and has also examined the operation of the

internal control system of the Company for year 2010.



Details of meetings held by the Audit Committee are as follows:

Date Main Topics Member Attendance

22 April 1. Reviewed the annual results of the Company for the year

2009;

2. Considered the re-appointment of the auditors and their

remuneration for the year 2010;

3. Debriefed the auditors’ report on financial report and the

work progress of the internal control system.

Zhai Xigui

Pu Hongjiu

Li Weian

Wang Junyan

Chen Changchun

Dong Yunqing

√

Attended by proxy

√

√

√

√

16 August The auditors reported to and discussed with the Audit

Committee on the problems found in the interim financial

auditing of 2010 and Sarbanes auditing.

Zhai Xigui

Pu Hongjiu

Li Weian

Wang Junyan

Chen Changchun

Dong Yunqing

√

Attended by proxy

√

√

√

√

5 January

2011 (a.m.)

1. The auditors reported to and discussed with the Audit

Committee regarding the problems found in the annual

auditing of 2010 and its internal control assessment;

2. Debriefed the management’s report on the progress and

rectification measures of the internal control system;

3. Discussed with the auditors responsible for the annual

audit and confirmed the time arrangements for the

annual audit of the financial report of the Company for

the year 2010, and at the meeting urged the auditors to

submit an audit report within the scheduled time.

Zhai Xigui

Pu Hongjiu

Li Weian

Wang Junyan

Chen Changchun

Dong Yunqing

√

Attended by proxy

√

√

√

√

5 January

2011 (p.m.)

The Management reported to the Audit Committee

regarding:

1. the production and operation status of the Company and

progress of significant events for the year 2010;

2. the Company’s financial policy, internal control, internal

audit and initiatives to counter corruption practices.

Zhai Xigui

Pu Hongjiu

Li Weian

Wang Junyan

Chen Changchun

Dong Yunqing

√

Attended by proxy

√

√

√

√

In January 2011, the Audit Committee discussed with the auditors responsible for the annual audit and confirmed

the time arrangements for the annual audit of the financial report of the Company for the year 2010. On 15 March

2011, the Audit Committee urged the auditors to submit an audit report within the scheduled time. The Audit

Committee also requested Board and the Audit Department, in writing, to supervise the auditors in the auditing

process.

In March 2011, and before the auditors conducted the annual audit, the Audit Committee reviewed and approved

the financial report prepared by the Group. After the auditors provided their preliminary opinions, the Audit

Committee again reviewed the financial report of the Group in March 2011 and was of the opinion that the

financial report truly and fully reflected the overall conditions of the Group.



At the meeting held by the Audit Committee on 17 March 2011, a resolution relating to the annual financial

report was passed and the submission of the report to the Board for review was approved. Resolutions were also

made in approving the concluding opinions of the auditors on the auditing work of the Company for the year

2010, as well as the re-appointment of the auditors for the year 2011. The Audit Committee considered that the

auditors have made objective and fair auditing comments in accordance with the related accounting principles

and requirements. The appointment of auditors and the decision making process of their remuneration are in

accordance with the law. The Audit Committee proposes the Company to re-appoint Shine Wing Certified Public

Accountants and Grant Thornton Jingdu Tianhua as the domestic and international auditors of the Company for

the year 2011, respectively.

(IV) Report of Remuneration Committee’s Performance

The Remuneration Committee of the fourth session of the Board (the “Remuneration Committee”) was set up

following the approval from the Board at the first meeting of the fourth session of the Board held on 27 June 2008.

The Remuneration Committee comprises of two independent non-executive Directors, namely Mr. Li Weian and

Mr. Wang Junyan and one non-executive Director, Mr. Dong Yunqing. Mr. Li Weian serves as the Chairman of

the Remuneration Committee.

The Remuneration Committee is mainly responsible for formulating remuneration policies for the Directors,

Supervisors and senior management, and recommending to the Board remuneration plans for the Directors,

Supervisors and senior management.

Pursuant to the “Remuneration Motion of the Directors, Supervisors and Senior Management for 2009” discussed

and passed at the sixth meeting of the fourth session of the Board held on 24 April 2009 and with reference to the

situation of completion of Company’s operating targets for 2009, the remuneration of the Directors, Supervisors

and senior management for 2009 were reviewed in accordance with the procedures.

Through various methods including external research and network information gathering, the Company

proactively searched and recorded the remuneration level of the senior managers of a number of listed companies

and within the industry so as to determine and provide a parameter for the remuneration of the Directors,

Supervisors and senior management.

In accordance with the laws, statutes, related regulations of the CSRC and Shanghai Stock Exchange, as well as the

internal control system and the Working Rules of the Remuneration Committee of the Board of the Company, the

Remuneration Committee has reviewed the remuneration of the Directors, Supervisors and senior management

disclosed by the Company for the year 2010.

Pursuant to the Remuneration Standards and Operation Assessment Methods for the Directors, Supervisors

and Senior Management of the Company, and having considered the fulfillment of the key financial indicators

and operating objectives for the year 2010, the division of work and the key responsibilities of the Directors,

Supervisors and senior management, as well as the completion of performance targets of the Directors,

Supervisors and senior management, the Remuneration Committee has reviewed the performance of the

Directors, Supervisors and senior management and has made comparisons against the requirements of their

performance appraisals. The Remuneration Committee considered that:



the Company determined the remuneration standards for the Directors, Supervisors and senior management of

the Company for the year in accordance with the unified remuneration management system. At the same time,

the Remuneration Committee reviewed the remuneration of the Directors, Supervisors and senior management

as disclosed in this annual report and found the disclosure to be consistent with the actual payments made. In the

year 2010, the remuneration of the Directors, Supervisors and senior management disclosed was not in violation

of the remuneration management system nor was it inconsistent with the remuneration management system.

(V) Report of Nomination Committee’s Performance

As approved at the seventeenth meeting of the fourth session of the Board held on 30 December 2010, the

Company established the Nomination Committee of the fourth session of the Board (the “Nomination

Committee”). The Nomination Committee consists of three Directors, namely Mr. Li Weimin, Mr. Zhai Xigui and

Mr.Li Weian; Mr. Li Weian serves as the chairman of the Nomination Committee.

The main duties of the Nomination Committee include: (1) to consider and formulate the selection criteria

and procedures for directors and managers, and make recommendations; (2) to extensively search for suitable

candidates of directors and managers for the Company, and make recommendations to the Board; (3) to review

the candidates for directors, and managers, and to recommend to the Board on the proposed appointments and

the succession planning of directors and managers and other relevant recommendations to the Board; (4) to assess

the independence of independent non-executive directors.

The Nomination Committee held its first meeting on 18 March 2011. Mr. Li Weimin, Mr. Zhai Xigui and Mr. Li

Weian attended the meeting and passed the following resolutions:

(1) The nomination of Directors of the fifth Session of the Board;

(2) The nomination of the general manager of the Company;

(3) The nomination of the deputy general manager of the Company.

(VI) The Setting up of the Strategy and Development Committee

As approved at the seventeenth meeting of the fourth session of the Board held on 30 December 2010, the

Company established the Strategy and Development Committee of the fourth session of the Board (the “Strategy

and Development Committee”). The Strategy and Development Committee consists of five directors, namely Mr.

Wang Xin, Mr. Li Weimin, Mr. Chen Changchun, Mr. Wu Yunxiang and Mr. Li Weian; Mr. Li Weimin serves as

the chairman.

The main duties of the Strategy and Development Committee include: (1) to conduct study and make proposals

on the long-term development strategy and significant investment decisions of the Company; (2) to conduct study

and make proposals on annual strategic development plan and operating plan; (3) to conduct supervision on the

implementation of the Company’s strategic plan and operating plan; (4) to conduct study and make proposals on

other significant issues impacting the development of the Company.



III. PROFIT DISTRIBUTION

The Board proposed the profit distribution plan for 2010 as follows:

(Prepared in accordance with PRC CASs)

Unit: RMB’000

Undistributed profits at the beginning of year 14,168,034

Add: Net profit attributed to the parent company 9,008,621

Less: Withdrawal of statutory surplus reserve 654,858

Ordinary shares dividends payable 1,229,600

Undistributed profits at the end of the year 21,292,197

of which: cash dividends proposed after the balance sheet date 2,901,856

In return for the long-term support by the Shareholders, the Board proposed to declare a cash dividend payable in

accordance with the Company’s persistent dividend policy at a sum of RMB2,901.9 million (tax inclusive), being

RMB0.59 per share (tax inclusive) for the year 2010. This dividend distribution plan shall be implemented within two

months after being approved by the Shareholders at the 2010 annual general meeting and then distributed to all the

Shareholders.

According to the Articles of the Company, cash dividends shall be calculated and announced in RMB.

The amount of cash dividends and its proportion to net profits for the previous three years of the Company:

2009 2008 2007

Amount of cash dividends (tax inclusive) (RMB million) 1,229.6 1,967.36 836.1

Net profit attributable to the parent company (RMB million) 3,880.3 6,483.6 2,693.3

Percentage of net profits (%) 31.69 30.34 31.04

Note: The calculation of the above-mentioned “Net profit attributable to the parent company” is based on the PRC CASs. Retroactive

adjustment was made according to the related provisions.



IV. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES OR

AMENDMENTS OF SIGNIFICANT ACCOUNTING ERRORS

1. Change of Accounting Policies and Amendments of Significant Accounting Errors

During the reporting period, the Group made no changes in accounting policies and amendments of significant

accounting errors.

2. Change of Accounting Estimates

Pursuant to the accounting principle of comparability, relevance and prudence, as approved at the fourteenth

meeting of the fourth session of the Board held on 23 April 2010, the subsidiary coal mines of the Group

should apply unit of production method on the amortization of mining rights fees from 1 January 2010. i.e., the

calculation should be based on the output of raw coal.

This change of accounting estimates only affects the amortization of mining rights fees of Jining III coal mine

and Zhaolou coal mine, and has no significant impact on the Group. In 2010, this caused a decrease of cost by

RMB14.91 million, an increase of profit before tax by RMB14.91 million, an increase of income tax by RMB0.7

million and an increase of net profit by RMB 14.21 million.

V. OTHERS

(1) Implementation of Technical Innovation

The Group thoroughly implemented the strategies of “strengthening an enterprise by science and technology”

and “enhancing safety by science and technology” and continuously perfecting its innovative system, through

a structure with the technical committee as the decision making body; the specialists committee as the advisory

body; the technical center as the management body; and a combination of various technical research organizations

and academic as well as industry research and development entities as the research and development body. The

Group revised the “Management Rules on Science Innovation of Yanzhou Coal Mining Company Limited”, which

formed the basis for normal and healthy development of science innovation.

In 2010, the Group spent RMB70.606 million for research and development and completed 81 scientific and

technological projects, obtained 24 technological patents and received 78 technological advancement incentives,

including 31 rewards at the provincial and ministerial levels.

The Group won the State Scientific and Technological Progress Award (Second Class) for its “Research and

Development of the Fully Mechanized Top Coal Caving Mining Technology and Equipment and its Domestic and

International Applications”.

(2) Special Purpose Vehicles

As at the end of the reporting period, the Group did not have any special purpose vehicles.



(3) Progress of the Establishment of the Company’s Internal Control System and the Responsibility

Statement

Please refer to the paragraph headed “1. Corporate governance situation” under “Chapter 7 Corporate

Governance” of this annual report for details.

(4) Implementation of Insider Management System

Please refer to the paragraph headed “1. Corporate governance situation” under “Chapter 7 Corporate

Governance” of this annual report for details.

(5) Independent Opinion and Special Clarification by the Independent Directors of the Company

with regard to Accumulated and Current External Guarantees

Based on the “Annual Report 2010 of Yanzhou Coal Mining Company Limited for the year ended 31 December

2010” (prepared under the PRC CASs) prepared by the Company’s auditors, and the “External Guarantees of

Yanzhou Coal Mining Company Limited” issued by the Company, the independent Directors have presented the

following independent opinion regarding the external guarantees by the Company and its subsidiaries:

1. External guarantees which were provided in previous period and extended to the reporting period

According to the financing requirements for the acquisition of Felix, the Company provided guarantees

to its wholly-owned subsidiary, Yancoal Australia Pty, for the obtaining of a USD2.9 billion and USD140

million overseas loans on 16 October 2009 and on 8 December 2009, respectively, which were counter-

guaranteed by Yankuang Group.

Prior to the acquisition of Felix by Austar Company, Felix provided guarantees amounting to AUD45.0671

million to its subsidiaries and jointly controlled entities for production and operation purposes.

The above mentioned guarantees extended to the reporting period but did not have any material impact on

the Company’s financial position and operating results which would damage the interests of the Company

and the Shareholders. The guarantees have been made strictly in accordance with the decision making and

approval procedures of the listing regulations and timely disclosure has been made.

2. External guarantees during the reporting period

During the reporting period, Yancoal Australia Pty Ltd, a wholly-owned subsidiary of the Company,

provided a guarantee of AUD14.6182 million to its subordinate holding companies (equivalent to

RMB96.3223 million).



(6) Major Suppliers and Customers

In 2010, the percentage of goods and services supplied by the Group’s five largest suppliers was less than 30% of

the total purchases.

In 2010, sales income to the Group’s five largest customers was less than 30% of the total sales income.

(7) Employees’ Pension Scheme

For details of the employees’ pension scheme of the Company, please refer to Note 48 to the consolidated financial

statements herein, which are prepared in accordance with the IFRS.

(8) Housing Scheme

According to the “Provision of Labor and Services Agreement” (which is referred to in the paragraph headed

“V. Material connected transaction” under “Chapter 10 Significant Events”), Yankuang Group is responsible

for providing dormitories to its own employees and the employees of the Group. The Group and Yankuang

Group share the sundry expenses relating to the provision of such dormitories on a pro-rata basis based on

their respective numbers of employees and the amount negotiated by the parties. Such expenses amounted to

RMB140.0 million and RMB140.0 million in 2009 and 2010, respectively.

Since 2002, the Company has been paying to its employees a housing allowance for the purchase of employee

residences, which is based on a fixed percentage of the employees’ wages. In 2010, the employees’ housing

allowances paid by the Company amounted to RMB247.7 million in total.

For details of the housing scheme, please refer to Note 49 to the consolidated financial statements herein, which

are prepared in accordance with the IFRS.


Changes in Share Capital and ShareholdersChapter 05

I. CHANGES IN SHARE CAPITAL

(1) Changes in Share Capital during the reporting period

During the reporting period, the total number of shares of the Company remained the same. The capital structure

of the company changed as part of the shares with restricted trading moratorium held by a natural person were

released from the moratorium.

1. Changes in share capital were as follows:

Unit: share Par value per share: RMB1.00

Before the change Movements After the change

Shares % (+,–) Shares %

1. Listed shares with restricted 2,600,041,800 52.8636 –20,000 2,600,021,800 52.8632

trading moratorium

Shares held by state-owned legal person 2,600,000,000 52.8627 0 2,600,000,000 52.8627

Natural person shareholding in A Shares 41,800 0.0009 –20,000 21,800 0.0005

2. Shares without trading moratorium 2,318,358,200 47.1364 +20,000 2,318,378,200 47.1368

A Shares 359,958,200 7.3186 +20,000 359,978,200 7.3190

H Shares 1,958,400,000 39.8178 0 1,958,400,000 39.8178

3. Total share capital 4,918,400,000 100.0000 0 4,918,400,000 100.0000

The public float of the Company is more than 25% of the Company’s total issued shares, which is in

compliance with the requirement of the Hong Kong Listing Rules.

2. Changes in shares with restricted trading moratorium were as follows:

Unit: share

Name of shareholder

Number of shares

with restricted trading

moratorium at the

beginning of year

Number of shares

released from

trading moratorium

Increase in number

of shares with

restricted trading

moratorium

Number of shares

with restricted trading

moratorium at the end

of year

Reasons for release

from trading

moratorium

Date of release

from trading

moratorium

Yang Deyu 20,000 20,000 0 0 Mr. Yang Deyu resigned from

his position as a Director and

Vice Chairman of the Company

on 31 December 2009.

1 July 2010

II. SECURITIES ISSUANCE AND LISTING

As at the end of the reporting period, the Company had not issued or listed any securities during the last three years.

During the reporting period, the total number of shares of the Company remained unchanged. The capital structure of

the company changed as part of the shares with restricted trading moratorium held by a natural person were removed

the ban on trading. The change in capital structure had no impact on the structure of assets and liabilities of the

Company.


Chapter 05Changes in Share Capital and Shareholders

III. SHAREHOLDERS

(1) Total Number of the Shareholders as at the end of the reporting period

As at 31 December 2010, the Company had a total of 119,821 Shareholders, of which 3 were holders of A Shares

subject to a trading moratorium, 119,655 were holders of A Shares without a trading moratorium and 163 were

holders of H Shares.

(2) The Top Ten Shareholders and the Top Ten Holders of Tradable Shares at the end of the

reporting period

As at 31 December 2010, the top ten Shareholders and the top ten holders of tradable shares not subject to a

trading moratorium were as follows:

Number of shareholders and situation of shareholdings

Unit: share

Total number of Shareholders 119,821

Shareholdings of the Top Ten Shareholders

Increase/ Number of

Percentage decrease shares with Number of

holding Number during the selling pledged

Class of of the total of shares reporting restrictions or locked

Name of Shareholder shares capital (%) held period (shares) held shares

Yankuang Group Domestic shares 52.86 2,600,000,000 0 2,600,000,000 0

Corporation Limited

HKSCC Nominees Limited H Shares 39.68 1,951,633,946 –2,521,200 0 Unknown

Xiangcai Securities Co., Ltd Others 0.11 5,449,462 5,449,462 0 0

Zhonghai Energy Mixed Others 0.11 5,349,806 5,349,806 0 0

Strategy Securities

Investment Fund （中海能源策略混合型證券投資基金）Bill & Melinda Gates Others 0.10 5,000,000 1,999,926 0 0

Foundation Trust

Jiashi Theme New Power Stock Others 0.10 4,941,170 4,941,170 0 0

Securities Investment Fund

（嘉實主題新動力股票型證券投資基金）Morgan Stanley China Others 0.07 3,406,300 3,406,300 0 0

A Share Fund

（摩根士丹利中國A股基金）Jiashi CSI 300 Index Others 0.07 3,393,644 –458,889 0 0

Securities Investment Fund

Dongwu Industries Alternative Others 0.07 3,279,990 3,279,990 0 0

Stock Securities

Investment Fund

（東吳行業輪動股票型證券投資基金）Da Rosa Jose Augusto Overseas 0.06 3,000,000 3,000,000 0 Unknown

Maria individual


Chapter 05 Changes in Share Capital and Shareholders

Top Ten Shareholders Holding Tradable Shares not subject to Trading Moratorium

Number of

Name of Shareholder tradable shares held Class of shares held

HKSCC Nominees Limited 1,951,633,946 Overseas listed foreign shares

Xiangcai Securities Co., Ltd 5,449,462 Domestically listed domestic shares

Zhonghai Energy Mixed Strategy Securities 5,349,806 Domestically listed domestic shares

Investment Fund

（中海能源策略混合型證券投資基金）Bill & Melinda Gates Foundation Trust 5,000,000 Domestically listed domestic shares

Jiashi Theme New Power Stock Securities 4,941,170 Domestically listed domestic shares

Investment Fund

（嘉實主題新動力股票型證券投資基金）Morgan Stanley China A Share Fund 3,406,300 Domestically listed domestic shares

（摩根士丹利中國A股基金）Jiashi CSI 300 Index Securities Investment Fund 3,393,644 Domestically listed domestic shares

Dongwu Industries Alternative Stock Securities 3,279,990 Domestically listed domestic shares

Investment Fund

（東吳行業輪動股票型證券投資基金）Da Rosa Jose Augusto Maria 3,000,000 Overseas listed foreign shares

Jingshun Great Wall Selected Blue Chip 2,935,266 Domestically listed domestic shares

Equity Investment Fund

Connected relationship or concert-party Among the Shareholders disclosed above, the fund manager

relationship among the above Shareholders of both the Jiashi Theme New Power Stock Securities

Investment Fund and Jiashi CSI 300 Index Securities

Investment Fund is Jiashi Fund Management Co. Ltd.

Apart from this, it is unknown as to whether other Shareholders

are connected with one another or whether any of these

Shareholders falls within the meaning of parties acting in

concert.

Notes:

1. The above information regarding “Total number of Shareholders” and the “Top Ten Shareholders and the Top Ten Holders of

Tradable Shares”, is based on the Register of Members provided by the China Securities Depository and Clearing Corporation

Limited Shanghai Branch and the Hong Kong Registrars Limited as at 31 December 2010.

2. As the clearing and settlement agent for the Company’s H Shares, HKSCC Nominees Limited, holds the Company’s H Shares in

the capacity of a nominee.



(3) Shareholdings of the Top Ten Shareholders and Top Ten Shareholders Holding Tradable Shares

subject to Trading Moratorium

As at 31 December 2010, the table sets out the shareholdings of the Top ten Shareholders and top ten Shareholders

holding tradable shares subject to trading moratorium:

Unit: shares

No

Name of

Shareholders

subject to trading

moratorium

Number of

shares subject

to trading

moratorium

held

Listing and

trading date

Number

of additional

tradable shares Undertakings

1 Yankuang Group 2,600,000,000 Upon performance of

Yankuang Group of its

undertakings in shares

reform of Yanzhou Coal,

Yankuang Group can

file the application and

obtain approval by the

competent authorities

0 Undertakings by

Yankuang Group,

please refer to the

paragraph headed

“VIII. Undertakings”

under “Chapter 10

Significant Events”

2

3

Wu Yuxiang

Song Guo

20,000

1,800

In accordance with the relevant laws, during their employment with

the Company, the Directors, Supervisors and senior management

staff can only transfer up to 25% of the total number of shares held

by them each year. If the above persons sold any shares held by

them within six months after the purchase, or made any purchase

within six months after disposal, any gain made shall be for the

benefit of the Company.


Chapter 05 Changes in Share Capital and Shareholders

(4) Substantial Shareholders’ interests and short positions in the shares and underlying shares of the

Company

Save as disclosed below, as at 31 December 2010, no other person (other than a Director, chief executive or

Supervisor of the Company) had any interest or short position in the shares and underlying shares of the

Company as recorded in the register to be kept pursuant to Section 336 of the Securities and Futures Ordinance

(the “SFO”).

Percentage Percentage

in the relevant in total

Number class of share share capital

Name of substantial Class of shares Type of capital of the of the

shareholders of shares held (shares) Capacity interest Company Company

Yankuang Group A Shares 2,600,000,000(L) Beneficial owner Corporate 87.84%(L) 52.86%(L)

(state-owned (note 1)

legal person

shares)

JP Morgan H Shares 274,853,588(L) Beneficial owner, Corporate 14.03%(L) 5.59%(L)

Chase & Co. 4,139,412(S) Investment manager 0.21%(S) 0.08%(S)

95,507,480(P) and custodian 4.88%(P) 1.94%(P)

(note 2) corporation/

Approved

lending agent

Templeton Asset H Shares 235,912,000(L) Investment manager Corporate 12.05%(L) 4.80%(L)

Management

Ltd.

BNP Paribas Investment H Shares 117,641,207 (L) Investment manager Corporate 6.00% (L) 2.39%(L)

Partners SA

Notes:

1. The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interests in a lending

pool.

2. The long positions in H Shares included 8,706,640 H Shares, which were held in the capacity of beneficial owners,

170,639,468 H Shares were held by investment managers and 95,507,480 H Shares were held as interests of controlled

custodian corporation/approved lending agent.

The aggregate interests of short positions in H Shares were held in the capacity of beneficial owners.

Among the aggregate interests of long position in H Shares, 81,736 H Shares were held as derivatives.

Among the aggregate interests of short position in H Shares, 1,939,412 H Shares were held as derivatives.

Pursuant to the PRC Securities Law and section 336 of the SFO, save as disclosed above, no other Shareholders recorded

in the register of the Company as at 31 December 2010 had an interest of 5% or more of the Company’s issued shares.



(5) LEGAL PERSONS AS SHAREHOLDERS WITH SHAREHOLDING OF 10% OR MORE

As at 31 December 2010, Yankuang Group held 2,600,000,000 Shares in the Company, representing 52.86% of the

total share capital of the Company.

Yankuang Group, a wholly state-owned enterprise, is the Controlling Shareholder of the Company established

with restructuring reform on 12 March 1996. Its registered capital is RMB3,353.388 million and its legal

representative is Mr. Wang Xin. Yankuang Group is principally engaged in coal production, coal chemicals, coal-

electrolytic aluminum and the manufacturing of whole set of machinery and electrical equipment. The actual

controller of Yankuang Group is the State-owned Assets Supervision and Administration Commission of the

People’s Government of Shandong Province.

During the reporting period, the Company’s controlling shareholder or its actual controller remained unchanged.

Diagram of equity and relationship of control between the Company and the actual controller:

SASAC of Shandong Province

Shareholding: 100%

Yankuang Group Corporation Limited

Shareholding: 52.86%

Yanzhou Coal Mining Company Limited

As at 31 December 2010, HKSCC Nominees Limited held 1,951,633,946 H Shares of the Company, representing

39.68% of the total share capital of the Company. HKSCC Nominees Limited is a participant of the Central

Clearing and Settlement System and provides securities registrations and trustee services to its customers.

(6) PRE-EMPTIVE RIGHTS

The Articles and the laws of the PRC do not contain any provision for any pre-emptive rights requiring the

Company to offer new shares on a pro-rata basis to its existing Shareholders.


Board of Directors, Supervisors, Senior Management and EmployeesChapter 06

I. BOARD OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT AS AT THE

DISCLOSURE DATE OF THIS ANNUAL REPORT

Number Number

of domestic of domestic

shares held at Increase/ shares held

the beginning decrease at the end

of this during the of this

reporting reporting reporting Beginning Date &

period period period Reasons Ending date of the

Name Gender Title (shares) (shares) (shares) for change current office term Note 1

Li Weimin Male Chairman of the Board 0 0 0 — 30 December 2010 –20 May 2011

Wang Xin Male Vice Chairman of the Board 0 0 0 — 30 December, 2010 – 20 May 2011

Shi Xuerang Male Director 0 0 0 — 27 June 2008 –20 May 2011

Wu Yuxiang Male Director, 20,000 0 20,000 No change 27 June 2008 –20 May 2011

Chief Financial Officer

Wang Xinkun Male Director, Deputy General Manager 0 0 0 — 27 June 2008 – 20 May 2011

Zhang Baocai Male Director, Deputy General Manager, 0 0 0 — Director, Secretary of the Board:

Secretary of the Board 27 June 2008 – 20 May 2011

Deputy General Manager:

25 March 2011 – 20 May 2011

Dong Yunqing Male Employee Director 0 0 0 — 27 June 2008 –20 May 2011

Pu Hongjiu Male Independent Non-executive Director 0 0 0 — 27 June 2008 –20 May 2011

Zhai Xigui Male Independent Non-executive Director 0 0 0 — 27 June 2008 –20 May 2011

Li Weian Male Independent Non-executive Director 0 0 0 — 27 June, 2008 –20 May 2011

Wang Junyan Male Independent Non-executive Director 0 0 0 — 27 June 2008 –20 May 2011

Song Guo Male Chairman of the Supervisory 1,800 0 1,800 No change 27 June 2008 –20 May 2011

Committee

Zhou Shoucheng Male Deputy Chairman of the 0 0 0 — 27 June 2008 –20 May 2011

Supervisory Committee

Zhang Shengdong Male Supervisor 0 0 0 — 27 June 2008 –20 May 2011

Zhen Ailan Female Supervisor 0 0 0 — 27 June 2008 –20 May 2011

Wei Huanmin Male Employee Supervisor 0 0 0 — 27 June 2008 –20 May 2011


Chapter 06Board of Directors, Supervisors, Senior Management and Employees

Number Number

of domestic of domestic

shares held at Increase/ shares held

the beginning decrease at the end

of this during the of this

reporting reporting reporting Beginning Date &

period period period Reasons Ending date of the

Name Gender Title (shares) (shares) (shares) for change current office term Note 1

Xu Bentai Male Employee Supervisor 0 0 0 — 27 June 2008 –20 May 2011

Zhang Yingmin Male General Manager 0 0 0 — 25 March 2011 – 20 May 2011

Jin Tai Male Deputy General Manager 0 0 0 — 27 June 2008 –20 May 2011

He Ye Male Deputy General Manager 0 0 0 — 27 June 2008 –20 May 2011

Lai Cunliang Male Deputy General Manager 0 0 0 — 27 June 2008 –20 May 2011

Tian Fengze Male Deputy General Manager 0 0 0 — 27 June 2008 –20 May 2011

Shi Chengzhong Male Deputy General Manager 0 0 0 — 27 June 2008 –20 May 2011

Ni Xinghua Male Chief Engineer 0 0 0 — 27 June 2008 –20 May 2011

Notes:

1. The above terms of office end at the closing of the Shareholders’ meeting for the election of members for the new sessions

of the Board and Supervisory committee and at the closing of the Board meeting for appointments or dismissals of senior

management.

2. Save as disclosed above, as at 31 December 2010, none of the Directors, chief executive and senior management had any

interests or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (as

defined in Part XV of the SFO), nor had any of them been granted any rights or short positions to subscribe for any interest in

the shares, underlying shares or debentures of the Company or any of its associated corporations (as defined in Part XV of the

SFO) which (i) was required to be recorded in the register established and maintained in accordance with section 352 of the

SFO; or (ii) required to be notified to the Company and Hong Kong Stock Exchange in accordance with the Model Code for

Securities Transactions by Directors of the Listed Issuers (the “Model Code”) (Appendix 10 to the Hong Kong Listing Rules)

(which shall be deemed to apply to the Supervisors to the same extent as it applies to the Directors).

All of the above disclosed interests represent the Company’s long position in shares.

3. As at 31 December 2010, the Directors, Supervisors and senior management together held 21,800 of the Company’s shares,

representing 0.0005% of the share capital of the Company. The Directors and Supervisors held these shares as beneficial owners.

As at 31 December 2010, none of the Directors, Supervisors, senior management nor their respective spouses or children

under the age of 18 were granted any rights by the Company for any interests in the shares, underlying shares or

debentures of the Company or its associated corporations.


Chapter 06 Board of Directors, Supervisors, Senior Management and Employees

II. MAJOR WORK EXPERIENCE

(1) Brief biography of Directors, Supervisors and Senior Management

Directors

LI Weimin, aged 50, a researcher in engineering technique applications, doctor of mining engineering and holder

of an EMBA degree. Mr. Li is the chairman of the Board of Yanzhou Coal Mining Company Limited. Mr. Li is

also a director, the general manager and the deputy secretary of the party committee of Yankuang Group. Mr.

Li joined the predecessor of the Company in 1982. In 2002, Mr. Li was appointed as the manager of the Jining

Coal Mine III of the Company. In 2006, Mr. Li was appointed as the deputy chief engineer and the deputy head

of the Safety and Supervision Bureau of Yankuang Group. In 2007, Mr. Li was promoted to be the head of the

Safety and Supervision Bureau of Yankuang Group. In May 2009, Mr. Li was appointed as the deputy general

manager of Yankuang Group. Mr. Li was appointed as the general manager of the Company in July 2009 and was

subsequently appointed as the vice chairman of the Company in February 2010. On 15 December 2010, Mr. Li

was appointed as a Director, the general manager and the deputy secretary of the party committee of Yankuang

Group. On 30 December 2010, Mr. Li was appointed as the chairman of the Board. Mr. Li graduated from China

University of Mining and Technology and Nankai University.

WANG Xin, aged 52, a researcher in engineering technique application, doctor of engineering technology and

holding an EMBA degree, the vice chairman of the Board. Mr. Wang is also the chairman of the board and the

secretary of the party committee of Yankuang Group. Mr. Wang joined the predecessor of the Company in 1982

and became the vice general manager of Yankuang Group in 2000. He was appointed as a director of the board

of directors and deputy general manager of Yankuang Group in 2002 and was appointed as the vice chairman

of the board of directors and the general manager of Yankuang Group in 2003. In 2004, he was appointed as a

Director and the chairman of the Board. Since 2007, he has been the deputy secretary of the party committee of

Yankuang Group. On 15 December 2010, Mr. Wang was appointed as the chairman of the board of directors and

the secretary of the party committee of Yankuang Group. On 30 December 2010, Mr. Wang was appointed as the

vice chairman of the Board. Mr. Wang graduated from China University of Mining and Technology and Nankai

University.

SHI Xuerang, aged 56, a senior engineer and holder of an EMBA degree, is a Director of the Company and deputy

general manager of Yankuang Group. From 2001 to 2003, Mr. Shi acted as the deputy general manager of Xinwen

Coal Mining Group Company Limited. He joined Yankuang Group as a deputy general manager in 2003 and was

appointed as a Director of the Company in 2005. Mr. Shi graduated from Nankai University.

WU Yuxiang, aged 49, a senior accountant with a master’s degree, is a Director and the chief financial officer of

the Company. Mr. Wu joined the Company’s predecessor in 1981. Mr. Wu was appointed as the manager of the

finance department of the Company in 1997, and was appointed as a Director and the chief financial officer of the

Company in 2002. Mr. Wu graduated from the Party School of Shandong Provincial Communist Committee.



WANG Xinkun, aged 58, a senior economist with a master’s degree, is a Director and the deputy general manager

of the Company. Mr. Wang joined the Company’s predecessor in 1977. Mr. Wang became a manager of the coal

transportation and sales department of the Company in 2000, and the deputy general manager of the Company in

2002. He was appointed as a Director of the Company in 2004. Mr. Wang graduated from Tianjin University.

ZHANG Baocai, aged 43, a senior accountant with an EMBA degree, is a Director, the deputy manager and the

board secretary of the Company. Mr. Zhang joined the Company’s predecessor in 1989 and was appointed as the

head of the planning and finance department of the Company in 2002. He was appointed as a Director and the

board secretary of the Company in 2006 and was appointed as the deputy general manger of the Company in 2011.

Mr. Zhang graduated from Nankai University.

DONG Yunqing, aged 55, a professor-level senior administrative officer, is a Director and the chairman of the

labor union of the Company. Mr. Dong joined the Company’s predecessor in 1981 and was the vice chairman

of the labor union of Yankuang Group from 1996 to 2002. Mr. Dong was appointed as a Director and the

chairman of the labor union of the Company in 2002. Mr. Dong graduated from Central Communist Party School

Correspondence Institute.

Independent Non-Executive Directors

PU Hongjiu, aged 74, a professor-level senior engineer, is an independent non-executive Director of the Company.

He is currently the deputy director of National Energy Experts Advisory Committee, the honorary chairman of

the China Coal Industry Association and the chairman of the China Coal Society. Mr. Pu served as the deputy

minister of the Ministry of Coal Industry and from 1997-2002 he was a member of the Communist Party of China

Central Commission of Discipline Inspection. Mr. Pu was a party group member and the head of disciplinary

inspection unit of the State Administration of Work Safety and State Administration of Coal Mine Safety in

2001. He has been the chairperson of China Coal Academy since 2001, the first vice-chairman of the China Coal

Industry Association from 2003 to 2009 and the honorary chairman in 2009. In 2007, he was appointed as the

deputy director of National Energy Experts Advisory Committee. He was appointed as an independent non-

executive Director of the Company in 2005. Mr. Pu graduated from Hefei Mining Institute.



ZHAI Xigui, aged 68, a senior auditor, is an independent non-executive director of the Company. Mr. Zhai is

currently the president of the China Audit Society. Mr. Zhai was the deputy chief auditor of the National Audit

Office in 1996 and was the vice secretary of the party group of the National Audit Office in 1999. He was elected as

the deputy to the 10th Session of the National People’s Congress of the PRC (“NPC”) and a member of the Finance

and Economics Committee of the 10th Session of the NPC in 2003. Mr. Zhai was appointed as the president of

China Audit Society in 2005 and as an independent non-executive Director of the Company in 2008. Mr. Zhai

graduated from Central University of Finance and Economics.

LI Weian, aged 54, a doctor of management and a doctor of economics, is an independent non-executive Director

of the Company and a professor of Nankai University. Mr. Li is the president of Dongbei University of Finance, a

director of the Corporate Management Research Center and a part-time member of the Science Counseling Team

of the Degree Committee of the State Council and a deputy director of the Business Administration Teaching

Direction Committee of the Ministry of Education, enjoying the special government allowance. He was appointed

as the Dean of the Business School of Nankai University in 1997, became one of the first group of National

distinguished professors in Arts appointed under the Cheung Kong Scholars Program in 2004 and undertook

the position as an independent non-executive Director of the Company in 2008. Mr. Li graduated from Nankai

University and Keio University.

WANG Junyan, aged 40, holder of a master’s degree in finance and an independent non-executive director of

the Company. Mr. Wang is the chairman of the board and the investment director of Shenghai Investment and

Management Co., Ltd. and the managing director and an investment director of CITIC Securities International

Investment and Management (Hong Kong) Co., Ltd. He was appointed as the managing director of Shanghai First

Finance Group Co., Ltd. in October 1997, and was appointed as the chairman of the board and an investment

director of Shenghai Investment and Management Co., Ltd in January 2007. He was appointed as an independent

non-executive Director of the Company and the managing director and the investment director of CITIC

Securities International Investment and Management (Hong Kong) Co., Ltd. in 2008. Mr. Wang graduated from

the University of Hong Kong.

Supervisors

SONG Guo, aged 56, a professor-level senior administrative officer with an EMBA degree, is the chairman of the

Supervisory Committee of the Company and a deputy secretary of the party committee of Yankuang Group. In

2002, Mr. Song was the officer-in-charge of the office of Coal Management Bureau of Shandong Province. He was

the secretary of the disciplinary inspection committee of Yankuang Group from 2003 to 2007. He was appointed

as a deputy secretary of the party committee of Yankuang Group in 2004 and the vice chairman of the supervisory

committee of the Company in 2005. In 2008, Mr. Song became the chairman of the supervisory committee of the

Company. He graduated from Nankai University.



ZHOU Shoucheng, aged 58, a professor-level senior administrative officer with Master’s degree, is the vice

chairman of the Supervisory Committee of the Company and the secretary of the disciplinary inspection

committee and the chairman of the labor union of Yankuang Group. Mr. Zhou joined the predecessor of the

Company in 1979 and has held the posts of the secretary of the Youth League committee of Yankuang Group, the

secretary of the party committee of Beisu Coal Mine and the secretary of the party committee of Xinglongzhuang

Coal Mine successively from 1984 to 2002. He was the chairman of the labor union of Yankuang Group from 2002

to 2007 and became the secretary of the disciplinary inspection committee and the chairman of the labor union of

Yankuang Group in 2007. In 2008, Mr. Zhou was appointed as the vice chairman of the Supervisory Committee of

the Company. Mr. Zhou graduated from Central Communist Party School Correspondence Institute.

ZHANG Shengdong, aged 54, is a senior accountant, a Supervisor of the Company. He is also the assistant to the

general manager, the deputy chief accountant and the head of the finance department of Yankuang Group. Mr.

Zhang joined the Company’s predecessor in 1981 and became the head of the Finance Department of Yankuang

Group in 1999. He also became the deputy chief accountant of Yankuang Group and a Supervisor of the Company

in 2002. Mr. Zhang was appointed as the assistant to the general manager of Yankuang Group in 2008. Mr. Zhang

graduated from China University of Mining and Technology.

ZHEN Ailan, aged 47, is a senior accountant, a senior auditor, a Supervisor of the Company and the deputy

director of the audit department of Yankuang Group. Ms. Zhen joined the Company’s predecessor in 1980.

She became the deputy director of the audit division of Yankuang Group in 2002 and was appointed as the

deputy head of the audit department of Yankuang Group in 2005. In 2008, Ms Zhen became a Supervisor of the

Company. Ms. Zhen graduated from Northeastern University of Finance and Economics.

WEI Huanmin, aged 54, a professor-level senior administrative officer, an Employee Supervisor and the secretary

of the disciplinary inspection committee of the Company. Mr. Wei joined the Company’s predecessor in 1984. He

was the deputy secretary of the disciplinary inspection committee and the director of the division of inspection of

the Company from 2002 to 2006. He was appointed as the secretary of the disciplinary inspection committee of the

Company in 2006. In 2008, Mr. Wei became an Employee Supervisor of the Company. Mr. Wei graduated from

Central Communist Party School Correspondence Institute.

XU Bentai, aged 52, a professor-level senior administrative officer with a master’s degree, is an employee

supervisor of the Company and the chairman of Jining III Coal Mine’s labor union. Mr. Xu joined the Company’s

predecessor in 1978 and became the chairman of Jining III Coal Mine’s labor union in 1999. Mr. Xu became an

employee supervisor of the Company in 2002. Mr. Xu graduated from the Party School of Shandong Provincial

Communist Committee.



Senior Management

ZHANG Yingmin, aged 57, a researcher in engineering technology application with an EMBA degree, is

the general manager of the Company and a director of Yankuang Group. Mr. Zhang joined the Company’s

predecessor in 1971. Mr. Zhang became the head of Production and Technology Department of Yankuang Group

in 1996. He became the head of Baodian Coal Mine in 2000. Mr. Zhang became an executive deputy general

manager of the Company in 2002 and a deputy general manager of Yankuang Group in 2003. In 2004, Mr. Zhang

became a director of Yankuang Group and became chief of the safety supervision bureau of the Company from

2004 to 2007. Mr. Zhang was appointed as the general manager of the Company in 2011. Mr. Zhang graduated

from Nankai University.

JIN Tai, aged 59, a researcher in engineering technology application with a master’s degree, is a deputy

general manager of the Company. Mr. Jin joined the Company’s predecessor in 1968. He became the head of

Xinglongzhuang Coal Mine in 1997 and became the deputy general manager of Yankuang Group in 2000. Mr.

Jin has been appointed as a deputy general manager of the Company since 2004. Mr. Jin graduated from China

University of Mining and Technology.

HE Ye, aged 53, a researcher in engineering technology application, a doctor of engineering, is a deputy general

manager of the Company. Mr. He joined the Company’s predecessor in 1993. He became the head of Jining II

Coal Mine in 1999 and became the executive deputy general manager of an industrial company subordinated to

Yankuang Group in 2002. Mr. He has been appointed as a deputy general manager of the Company since 2004.

Mr. He graduated from China University of Mining and Technology.

LAI Cunliang, aged 50, a senior engineer with a master’s degree in mining engineering and an EMBA degree, is

a deputy general manager of the Company. Mr. Lai joined the Company’s predecessor in 1980 and became the

head of Xinglongzhuang Coal Mine of the Company in 2000. He has been a director and the general manager

of Yancoal Australia Pty since 2004. Mr. Lai became a deputy general manager of the Company in 2005 and

became executive director of Yancoal Australia Pty in 2009. He graduated from China University of Mining and

Technology and Nankai University.

TIAN Fengze, aged 54, a senior economist with a master’s degree, is a deputy general manager of the Company.

Mr. Tian joined the Company’s predecessor in 1976 and became the head of Beisu Coal Mine in 1991. Mr. Tian

became a deputy general manager of the Company in 2002. He graduated from the Party School of Shandong

Provincial Communist Committee.

SHI Chengzhong, aged 48, a researcher in engineering technology application with an EMBA degree and Master

of Mining engineering, is a deputy general manager of the Company. Mr. Shi joined the Company’s predecessor

in 1983 and became a deputy chief engineer of Yankuang Group in 2000 and a deputy general manager of the

Company in 2002. He graduated from Northeastern University and Nankai University.

NI Xinghua, aged 54, a researcher in engineering technology application with a master’s degree, is the chief

engineer of the Company. Mr. Ni joined the Company’s predecessor in 1975 and became a deputy chief engineer

of Yankuang Group in 2000. He has been appointed as the chief engineer of the Company since 2002. Mr. Ni

graduated from Tianjin University.



(2) Term of office of Directors, Supervisors and senior management employed by the Controlling

Shareholder

Name Unit Title Employment

Li Weimin Yankuang Group General Manager, the party committee Since 15 December 2010

deputy Secretary, director

Wang Xin Yankuang Group Chairman of the board of directors, Since 15 December 2010

the party committee Secretary

Shi Xuerang Yankuang Group Vice General Manager Since 16 October 2003

Song Guo Yankuang Group The party committee deputy Secretary Since 16 December 2004

Zhou Shoucheng Yankuang Group Chairman of the Labor Union, Since 26 May 2002

Secretary of the Disciplinary Since 13 December 2007

Inspection Committee

Zhang Shengdong Yankuang Group Deputy chief Accountant Since 9 June 2002

Assistant to General Manager Since 30 October 2008

Head of Finance Department Since 28 January 1999

Zhen Ailan Yankuang Group Deputy Director of Audit Department Since 13 March 2005

Zhang Yingmin Yankuang Group Director Since 16 December 2004



(3) Term of office of Directors, Supervisors and senior management in associated companies


Li Weimin Yanmei Heze Neng Hua Co., Ltd Vice Chairman of the

Board

Since 28 October 2009

Yanzhou Coal Mining Ordos Neng Hua Co.,

Ltd

Vice Chairman of the

Board

Since 19 December 2009

Yancoal Australia Pty Limited Vice Chairman of the

Board


Austar Coal Mine Pty Limited Vice Chairman of the

Board


Felix Resources Limited Vice Chairman of the

Board


Shaanxi Future Energy Chemical Corp. Ltd Chairman of the Board Since 22 January 2011

Wang Xin Shanghai Yankuang Energy Science Research

Co., Ltd.

Chairman of the Board Since 20 January, 2003

Yanmei Heze Neng Hua Co., Ltd Chairman of the Board Since 14 May 2004

Yancoal Australia Pty Limited Chairman of the Board Since 13 August 2005

Austar Coal Mine Pty Limited Chairman of the Board Since 13 August 2005

Yankuang Xinjiang Neng Hua Company

Limited

Chairman of the Board Since 18 July 2007

Yanzhou Coal Mining Yulin Neng Hua Co.,

Ltd

Chairman of the Board Since 21 July 2009

Yanzhou Coal Mining Ordos Co., Ltd Chairman of the Board Since 19 December 2009

Felix Resources Limited Chairman of the Board Since 19 December 2009

Wu Yuxiang Yanmei Heze Neng Hua Co., Ltd Director Since 14 May 2004

Yancoal Australia Pty Limited Director Since 13 August 2005

Austar Coal Mine Pty Limited Director Since 13 August 2005

Yanzhou Coal Shanxi Neng Hua Company

Limited

Director Since 15 June 2007

Felix Resources Limited Director Since 19 December 2009

Huadian Zouxian Power Generation

Company Limited.

Chairman of the

Supervisory

Committee

Since 14 August 2007

Wang Xinkun Shandong Yanmei Shipping Co., Ltd Chairman of the Board Since 10 December 2003

Yanzhou Coal Shanxi Neng Hua Company

Limited

Director Since 15 June 2007

Huadian Zouxian Power Generation

Company Limited.

Vice Chairman of the

Board


Zhang Baocai Yanzhou Coal Yulin Neng Hua Co., Ltd Director Since 23 July 2008

Inner Mongolia Haosheng Coal Mining

Company Limited

Director Since 17 November 2010

Shaanxi Future Energy Chemical Corp. Ltd Chairman of the

Supervisory

Committee

Since 22 January 2011




Pu Hongjiu Shanghai Datun Energy Company Limited Independent Non-

executive Director

Since 20 April 2004

Wang Junyan Livzon Pharmaceuticals Company Limited Independent Non-

executive Director

Since 16 April 2007

China Aerospace International Holdings Ltd Independent Non-

executive Director

Since 30 March 2007

Shenghai Investment and Management Co.,

Ltd.

Chairman and

Investment Director

Since 1 January 2007

CITIC Securities International Investment

and Management (Hong Kong) Co., Ltd.

Managing Director and

Investment Director

Since 1 August 2008

China New Economy Investment Co., Ltd Executive Director Since 1 February 2010

Song Guo Jinan Yangguang Yibai Estate Development

Co., Ltd

Chairman of the

Supervisory

Committee


Zhang Shengdong Yanzhou Coal Shanxi Neng Hua Company

Limited

Chairman of the

Supervisory

Committee

Since 15 June 2007

Yankuang Group Finance Co., Ltd Vice Chairman of the

Board

Since 18 April 2010

Shaanxi Future Energy Chemical Corp. Ltd Director Since 22 January 2011

Zhen Ailan Beijing Yinxin Guanghua Real Estate

Development Company

Chairman of the

Supervisor Committee

Since 20 May 2005

Jinan Yangguang Yibai Real Estate

Development Company

Supervisor Since 30 August 2005

Yankuang Group Finance Co., Ltd the Chief of Supervisor Since 18 April 2010

Yankuang Aluminum International Trade

Co., Ltd

Chairman of the

Supervisor Committee

Since 3 February 2010

Wei Huanmin Yanzhou Coal Yulin Neng Hua Co., Ltd Chairman of the

Supervisory

Committee

Since 23 July 2008

Yanzhou Coal Ordos Neng Hua Co., Ltd Chairman of the

Supervisory

Committee


Yanmei Heze Neng Hua Co., Ltd Chairman of the

Supervisory

Committee

Since 28 October 2009

He Ye Yanzhou Coal Yulin Neng Hua Co., Ltd Director, General

Manager

Since 23 July 2008

Yanzhou Coal Ordos Neng Hua Co., Ltd Director, General

Manager


Inner Mongolia Haosheng Coal Mining

Limited

Chairman of the Board Since 17 November 2010

Lai Cunliang Yancoal Australia Pty Limited Executive Director Since 19 December 2009

Austar Coal Mine Pty Limited Executive Director Since 19 December 2009

Felix Resources Limited Executive Director Since 19 December 2009




Shi Chengzhong Guizhou Panjiang Coal Power Company

Limited

Director Since 4 November 2003

Shaanxi Future Energy Chemical Corp. Ltd Director Since 22 January 2011

Ni Xinghua Shaanxi Future Energy Chemical Corp. Ltd Director Since 22 January 2011

III. REMUNERATION POLICY FOR DIRECTORS, SUPERVISORS AND SENIOR

MANAGEMENT

The remuneration for the Directors, Supervisors and senior management is proposed to the Board by the Remuneration

Committee of the Board. Upon review and approval by the Board, any remuneration proposal for the Directors and

Supervisors will be proposed to the Shareholders’ general meeting for approval. The remuneration for the senior

management is reviewed and approved by the Board.

The Company adopts a combined annual remuneration and risk control system as the principal means for assessing

and rewarding the Directors and senior management. The annual remuneration consists of basic salary and benefit

income. The basic salary is determined according to the operational scale of the Company with reference to the market

wages and the income of employees, whereas benefit income is determined by the actual operational achievement of

the Company. The annual remuneration for the Directors and senior management of the Company are pre-paid on a

monthly basis and are cashed after the assessment to be carried out in the following year.

The remuneration policy for the other employees of the Group is principally a position and skill remuneration system,

which determines the remuneration of the employees on the basis of their positions and responsibilities and their

quantified assessment results. Rewards are linked to the Company’s overall economic efficiency.

The aggregate wages and bonuses for the year 2010 paid for Directors, Supervisors and senior management of the Group

were RMB5.778 million (tax inclusive), with details listed below:

Title Name

Salary received in

the reporting period

(tax inclusive) (RMB’000)

Director Wang Xin Wages and allowance received from the Controlling Shareholder

Geng Jiahuai Wages and allowance received from the Controlling Shareholder

Li Weimin 226

Shi Xuerang Wages and allowance received from the Controlling Shareholder

Chen Changchun Wages and allowance received from the Controlling Shareholder

Wu Yuxiang 323

Wang Xinkun 412

Zhang Baocai 374

Dong Yunqing 371

Pu Hongjiu 113

Zhai Xigui 113

Li Weian 113

Wang Junyan 113

.



Title Name

Salary received in

the reporting period

(tax inclusive) (RMB’000)

Supervisor Song Guo Wages and allowance received from the Controlling Shareholder

Zhou Shoucheng Wages and allowance received from the Controlling Shareholder

Zhang Shengdong Wages and allowance received from the Controlling Shareholder

Zhen Ailan Wages and allowance received from the Controlling Shareholder

Wei Huanmin 366

Xu Bentai 415

Senior

Management

Zhang Yingmin 227

Jin Tai 227

He Ye 226

Lai Cunliang 664

Qu Tianzhi 342

Tian Fengze 349

Shi Chengzhong 410

Ni Xinghua 394

IV. APPOINTMENT, RESIGNATION OR ELECTION OF DIRECTORS, SUPERVISORS AND

SENIOR MANAGEMENT DURING THE REPORTING PERIOD

(1) Election of Directors, Chairman and Vice Chairman of the Board

At the first extraordinary general meeting of 2010 of the Company and the thirteenth meeting of the fourth session

of the Board held on 26 February 2010, Mr. Li Weimin was elected as director and vice chairman of the fourth

session of the Board.

At the seventeenth meeting of the fourth session of the Board held on 30 December 2010, Mr. Li Weimin and Mr.

Wang Xin were elected as the chairman and the vice chairman of the fourth session of the Board respectively.

(2) Resignation of Directors

Mr. Geng Jiahuai, the former Vice Chairman of the Board, had submitted his resignation report to the Board on

30 December 2010. Following his resignation, Mr. Geng would no longer hold any offices as vice chairman and

Director of the Company.

Mr. Chen Changchun, the former Director of the Board, had submitted his resignation report to the Board on 9

March 2011. Following his resignation, Mr. Chen would no longer hold any offices as Director of the Company.



(3) Change of the Senior Management

At twentieth meeting of the fourth session of the Board held on 25 March 2011, Mr. Zhang Yingmin was

appointed as the general manager of the Company and Mr. Zhang Baocai was appointed as the deputy general

manager of the Company.

Mr. Qu Tianzhi, former vice general manager of the Company resigned from his position on 27 August 2010 as a

result of change of job.

Save as disclosed above, there was no other appointment or resignation of Directors, Supervisors and senior

management during the reporting period.

V. INTERESTS OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT IN

CONTRACTS

None of the Directors, Supervisors or senior management of the Company had a direct or indirect material interest in

any material contract entered into or performed by the Company, its Controlling Shareholder, any of its subsidiaries or

fellow subsidiaries during the year ended 31 December 2010.

VI. EMPLOYEES

As at 31 December 2010, the Group had a total number of 50,909 employees, of whom 3,687 were administrative

personnel, 1,863 were technicians, 35,403 were involved in production and 9,956 were other supporting staff.

The Group had 20.6% of staff who had diploma or degree, 68.5% of staff had middle school education (including high

school or technical school) and 10.9% of staff had primary school education or below.

Pursuant to the “Provision of Labor Service Supply Agreement” entered into between the Company and Yankuang

Group, Yankuang Group shall provide welfare services to the resigned and retired staff of the Company, while the

Company shall pay welfare fees (including welfare expenses required by the PRC such as pensions, subsidies and other

benefits) to the resigned and retired staff of Yankuang Group. During the reporting period, the total number of resigned

and retired staff of which the Group was responsible for their welfare payment was 16,752.

The total wages and allowances of the staff of the Group for the year 2010 amounted to RMB4.0868 billion.


Corporate GovernanceChapter 07

I. CORPORATE GOVERNANCE(in accordance with PRC CASs)

In accordance with PRC Company Law, PRC Securities Law, foreign and domestic laws and regulations in places where

the Company’s shares are listed, the Group has set up a relatively regulated, stable and established corporate governance

system and has abided by the corporate governance principles of transparency, accountability and protection of the

rights and interests of all Shareholders. There is no significant difference between the corporate governance system of

the Company and the requirements in relevant documents detailed by the CSRC.

(1) Corporate Governance

The Company has closely monitored the securities market standards and amendments to rule of law, and has

actively improved its corporate governance during the reporting period:

1. As approved at the first 2010 extraordinary general meeting of the Company held on 26 February 2010,

the Company amended the Rules of Procedures for the Board of Yanzhou Coal Mining Company Limited

and the Rules of Procedures for the Supervisory Committee of Yanzhou Coal Mining Company Limited.

Following amendments to the listing regulatory requirements and the Articles, amendments have been

made to the duties and powers of independent Directors, the composition of specialized committees, the

composition of the Supervisory Committee and method of notification of Supervisory Committee meetings.

2. As approved at the thirteenth meeting of the fourth session of the Board of the Company held on 26

February 2010, the Company made amendments to the Information Disclosure Management System of

Yanzhou Coal Mining Company Limited, established an accountability system concerning the responsibility

for the information disclosure of significant errors and a record system of the use of external information,

improved the use of external information system and amended the accountability provisions concerning

unauthorized disclosure and non-disclosure of important information.

3. As approved at the fourteenth meeting of the fourth session of the Board of the Company held on 23 April

2010, the Company made amendments to the Management and Use System of Raised Funds of Yanzhou

Coal Mining Company Limited and the Code for Securities Transactions of the Management of Yanzhou

Coal Mining Company Limited, amended the provisions of the management and use of excess raised funds,

improved the provisions of preceding procedure, limitation of amount, untradeable period and the legal

procedure required by the change of securities after the securities transactions.

4. As approved at the first 2011 extraordinary general meeting of the Company held on 18 February 2011,

the Company amended the Articles of Yanzhou Coal Mining Company Limited, the Rules of Procedures

for the Shareholders’ Meeting of Yanzhou Coal Mining Company Limited and the Rules of Procedures for

the Board of Yanzhou Coal Mining Company Limited. Amendments have been made to the procedure

for proposing the general meeting by qualified shareholders, and the approval authority of the Board of

Directors and the general manager.


Chapter 07 Corporate Governance

(2) Work policy and performance of Independent Directors

The Committee of Independent Directors was set up at the time of establishment of the Company. At the

twentieth meeting of the second session of the Board meeting held on 25 April 2005, the Work Policy and

Performance of Independent Directors of Yanzhou Coal Mining Company Limited was approved. This policy

mainly included the duties and powers of independent Directors, the work policy of independent non-executive

Directors with regards to the preparation of annual reports, their terms of office and conditions, protection of the

right of information, risks and protection of duties, etc. The Company has continuously amended and improved

the duties of independent non-executive Directors according to the relevant listing rules.

During the reporting period, the independent Directors have carried out their duties in accordance with the

requirements of the CSRC’s Corporate Governance of Listing Companies, Guiding Opinion Relating to the

Establishment of Independent Director Systems by Listed Companies, foreign and domestic listing rules, the

Articles and the Work Policy of Independent Directors by Yanzhou Coal Mining Company Limited. The

independent Directors have attended the Company’s Board meetings in 2010, actively participated in the

establishment of committees under the Board, provided professional and constructive advice on significant

matters of the Company and have performed an important function in the operation of the Company by

protecting the legitimate interests of minority Shareholders.

During the reporting period, the independent Directors of the Company have expressed a concurring opinion on

the 2010 remuneration policies of the Company’s Directors, Supervisors and senior management, the election of

Directors and the recruitment of senior management. They also issued a special opinion in relation to the granting

of the external guarantee for the year 2009 and the first half of 2010. Independent opinions were expressed in

relation to the execution of daily connected transactions for the year 2009.

During the reporting period, the attendance at Board meetings by the independent Directors was as follows:

Number of

board meetings Attendance Attendance

Name of Independent held during in person by proxy Absence

Non-executive Director the year (number) (number) (number) (number)

Pu Hongjiu 6 6 0 0

Zhai Xigui 6 6 0 0

Li Weian 6 6 0 0

Wang Junyan 6 6 0 0

Note: In accordance with the listing rules of CSRC and the Articles, the Directors may vote in the meeting by facsimile.


Chapter 07Corporate Governance

During the reporting period, the independent Directors had no objections to any resolutions or other matters.

In the progress of preparing the 2010 annual report, the independent Directors strictly complied with the Notice

of the China Securities Regulatory Commission (Announcement of Securities and Future Commission [2010] No.

37) and conscientiously fulfilled their duties, maximizing their independent role in the preparation of the annual

report.

(3) “Five Separations”

Human Resources: The Company maintains independence in areas of labor, personnel and payroll management.

The senior management of the Company are remunerated by the Company and they have not taken up other

duties other than as Directors of the Controlling Shareholder.

Assets: The Company is equipped with an independent production system, a supplementary production system

and related facilities, as well as a purchase and sales system. The Company is the legal owner of certain industrial

property rights, intangible assets such as non-patented technology. The trade mark of the Company is registered

and owned by the Controlling Shareholder and can be used by the Company at zero consideration.

Finance: The Company has established an independent finance department, an independent accounting system

and an independent financial management policy. The Company has maintained separate bank accounts.

Organization: The Company has a complete internal business and management structure and independently

exercises its management authority. There does not exist any supervisory or reporting relationships with the

functional departments of the Controlling Shareholder or other controlled entity.

Business: The Company operates with an extensive business scope that is independent from the Controlling

Shareholder or other controlled entity.



(4) The Internal Control System of the Company

1. The Establishment and Implementation of the Internal Control System

During the reporting period, in accordance with the relevant requirements under Basic Norms of Internal

Control for Enterprises and the Supporting Guidelines of Internal Control jointly issued by Ministry of

Finance, China Securities Regulatory Commission(CSRC), the Audit Committee, China Banking Regulatory

Commission(CBRC) and the China Insurance Regulatory Commission; the US Sarbanes-Oxley Act;

Guidance on Internal Control for Listed Companies issued by the Shanghai Stock Exchange and the Rules

Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Listing

Rules”) issued by Hong Kong Stock Exchange, the Group has made arrangements regarding internal control

procedures and systems for the Company, its subordinated departments and subsidiaries, and the business

of the Company to further strengthen the establishment of the internal control system, established and

strengthened its internal control system. The comprehensive rectification of the Basic Norms of Internal

Control of Yanzhou Coal Mining Company Limited commenced in October 2010. The working team for

the basic norms of internal control of the Company was established, with Chairman of the Board acting as

the first duty officer, chief financial officer as the coordinator and the Finance Department as the leading

department responsible for all the detailed work during the implementation of the basic norms of internal

control. The audit department of the Board of the Company, finance department, information management

department, risk management department, human resources department, planning development

department and other departments serve as the internal control organizations and the main inspecting and

supervisory divisions.

2. The Working Plan and Implementation Scheme of the Establishment of the Internal Control System

Pursuant to the Implementation Scheme of the Basic Norms of Internal Control formulated by the

Company, the revised Basic Norms of Internal Control of Yanzhou Coal Mining Company Limited is to be

completed by the end of March 2011. The Self-assessment of corresponding basic norms of the subsidiaries

of the Company will be formulated by the first half of 2011. At the same time, the Company has formulated

the working plan of engaging certified public accountants for evaluation of the internal control and has

made detailed arrangement for this evaluation for the year 2011.

3. The Establishment and Operation of the Internal Control System of the Financial Statement

During the reporting period, the Company has further strengthened the establishment of the internal

control system of the financial statement. The establishment of internal system including “Examination

Method of Informationalized Management” and “Opinions in relation to the Further Strengthening of the

Internal Financial Control”, has improved the system and strengthened the inspection of the fundamental

procedures and business training, which further enhanced the execution capacity of the system and ensured

the authenticity and integrity of the financial statement of the Company.



4. Statement of the Board on the Responsibility for the Internal Control

In accordance with the regulations under Basic Norms of Internal Control for Enterprises and Basic

Norms of Internal Control of Yanzhou Coal Mining Company Limited, the Board is responsible for the

establishment and effective implementation of internal control system; the Supervisory Committee is

responsible for supervision of the internal control system established and implemented by the Board; the

management is responsible for the organization and management of the daily operation of internal control.

5. Appraisal of the Effectiveness of the Operation of the Internal Control

The Board has assessed the effectiveness of the Company’s internal control system at least once a year since

2007. As at the disclosure date of this annual report, the conclusions to the appraisal of the effectiveness of

the operation of the internal control system of the Company for the year 2009 and 2010 are as follows:

1) At the fourteenth meeting of the fourth session of the Board held on 23 April 2010, the Board made an

assessment on the effectiveness of its internal control systems of the Company for the year 2009. The

Board considered that the internal control system of the Company is sound and has been implemented

effectively and no major fault was found in the design of the internal control or its implementation.

Under the assessment made by Grant Thornton Certified Public Accountants, as at 31 December

2009, based on the Internal Control – Overall Framework Report issued by the Anti-False-Financial-

Report Committee of America, effective internal control was maintained in each aspect of the financial

statements of the Company.

2) At the twentieth meeting of the fourth session of the Board held on 25 March 2011, the Board made an

assessment on the effectiveness of its internal control systems for the year 2010. The assessment result

was that the internal control system of the Company is sound and has been implemented effectively.

There was no major fault in the design of the internal control or implementation. As at the disclosure

date of this report, Grant Thornton Jingdu Tianhua is making an external assessment on whether the

internal control of the Company in 2010 complies with the requirements of the US Sarbanes-Oxley

Act.

The self-assessment report of the Board was posted on the Shanghai Stock Exchange’s website, Hong Kong

Stock Exchange’s website and the Company’s website.

(5) The implementation of insider management system during the reporting period

During the reporting period, the Company strictly enforced the relevant provisions of the insider system in the

“Information Disclosure Management System of Yanzhou Coal Mining Company Limited.”, and no insiders

traded the shares of the Company before the disclosure of the significant price-sensitive internal information.



(6) Appraisal and Motivation Mechanism for Senior Management and the relevant Award System

during the Reporting Period

The Company has adopted a combined annual remuneration and risk control system as the principal means

for assessing and rewarding the Directors and senior management of the Company since 2003. This links the

assessment results with the economic and operational achievement of the Company. In accordance with the

relevant operation and management indicators and standards, the Company assesses the performance and

efficiency of the senior management. Pursuant to the completion of the operation indicators of the senior

management and the results of the assessment, the Company would pay the remuneration to the senior

management for the year 2010.

(7) Horizontal Competition and Connected Transactions

No horizontal competition was found between the Company and the Controlled Shareholder.

The details of connected transactions are described in the paragraph headed “V. Major Connected Transactions”

under the Chapter headed “Chapter 10. Significant Event” in this annual report.

(8) The Performance Report of the Corporate Social Responsibility

The performance report of the Corporate Social Responsibility was posted on the Shanghai Stock Exchange’s

website, Hong Kong Stock Exchange’s website and the Company’s website.

(9) Inspection of the Supervision Institutions

According to the Site Inspection Methods for Listed Companies, Shandong Securities Regulatory Bureau of CSRC

conducted routine supervisory inspection on the regulated operation of listed companies within its jurisdiction in

2010. Shandong Securities Regulatory Bureau conducted a site inspection on the Company from 21 July 2010 to 30

July 2010 and issued Decision on Administrative and Supervisory Measures.

“Rectification Scheme for the ‘Decision on Administrative and Supervisory Measures’ of Shandong Securities

Regulatory Bureau” (“Rectification Scheme”) was approved at the seventeenth meeting of the fourth session of

the Board held on 30 December 2010. As at the disclosure date of this report, all rectifications in the Rectification

Scheme were completed excluding the rectification item of “overlapping of use of offices between the Company

and Yankuang Group” which will be fulfilled by the end of 2011.

For details, please refer to the “Rectification Scheme” dated on 31 December 2010. The above disclosure

information was also posted on the Shanghai Stock Exchange’s website, the Hong Kong Stock Exchange’s website,

the Company’s website and/or China Securities Journal and Shanghai Securities news.



II. REPORT OF CORPORATION GOVERNANCE(Under the Hong Kong listing rules)

(1) Compliance with Corporate Governance Practices

The Group has set up a relatively regulated, stable and established corporate governance system and has abided by

the corporate governance principles of transparency, accountability and protection of the rights and interests of all

Shareholders.

The Board believes that good corporate governance is important to the operation and development of the Group.

The Board regularly reviews corporate governance practices to ensure the Company’s operation is in compliance

with the laws, regulations and supervisory rules of places where the shares of the Company are listed, and

consistently endeavors to implement a high standard of corporate governance.

The corporate governance rules implemented by the Group include, but are not limited to, the following: the

Articles, the Rules of Procedure for Shareholders’ Meetings, the Rules of Procedure for Board Meetings, the Rules

of Procedure for Supervisory Committee Meetings, the System of Work of the Independent Directors, the Rules

for Disclosure of Information, the Rules for the Approval and the Disclosure of Connected Transactions of the

Company, the Rules for the Management of Relationships with Investors, the Code for Securities Transactions

of the Management, the Standard of Conduct and Professional Ethics for Senior Employees, the Measures on the

Establishment of Internal Control System and the Measures on Overall Risk Management. For the year ended 31

December 2010 and as of the date of this annual report, the corporate governance rules and practices of the Group

are compliant with the principles and the code provisions set out in the Code on Corporate Governance Practices

(the “Corporate Governance Code”) contained in Appendix 14 of the Hong Kong Listing Rules.

The following are major aspects of the corporate governance practice adopted by the Group, which are more

stringent than the Corporate Governance Code:

• The Company actively carried forward the development of the specialized committee of the Board. Besides

the requirement of establishing audit committee of the Board, remuneration committee of the Board as set

out in the Corporate Governance Code and nomination committee of the Board as suggested best practice

under the Corporate Governance Code, the Company also established the strategy and development

committee of the Board. All these committees were entrusted with detailed responsibilities.

• The provisions set out in the Code for Securities Transactions of the Management, and the Standard of

Conduct and Professional Ethics of the Senior Employees, are stricter than those of the Model Code of the

Hong Kong Listing Rules;

• The Group improved the structure of its internal control system to comply with the US Sarbanes-Oxley Act,

Guidance on Internal Control for Listed Companies issued by the Shanghai Stock Exchange, Basic Norms

of Internal Control jointly issued by five ministries including the Chinese Ministry of Finance and the

provisions under the Corporate Governance Code others. Meanwhile, the Group has been facilitating the

establishment of the internal control system for its businesses in the Australia. The standards of the internal

control are more detailed than those of the Corporate Governance Code;



• The Company announced the evaluation conclusions of the Board in relation to the effectiveness of internal

control for the year 2010;

During the reporting period, the Company has strictly complied with the above corporate governance practices

and has not deviated from any such requirements.

(2) Securities Transactions of Directors and Supervisors

Having made enquiries of all the Directors and Supervisors, the Directors and Supervisors have strictly complied

with the Model Code and the Code for Securities Transactions of the Management of the Company during the

reporting period.

On 21 April 2006, the Code for Securities Transactions of the Management was approved at the Company’s

fifth meeting of the third session of the Board. On 23 April 2010, the Code for Securities Transactions of the

Management was amended at the Company’s fourteenth meeting of the fourth session of the Board. The relevant

requirements relating to the securities transactions under the PRC domestic laws, regulations and requirements on

supervision are included in the Code for Securities Transactions of the Management, which is drafted based on the

Model Code, but is stricter than the Model Code.

(3) Board of Directors

As at the disclosure date of this annual report, the Board comprises eleven Directors including four independent

non-executive Directors.

The names, positions and resignations of the Directors are described in the paragraph headed “Chapter 6

Shareholding of Directors, Supervisors, Senior Management and Employees of the Company” under the section

headed “Board of Directors, Supervisors, Senior Management and Employees” in this annual report.

The Board is mainly responsible for the strategic decision making of the Company and the supervision of

operations of the Company and its management. The Board primarily has the powers to decide on operation plans

and investment policy, to formulate the policy for financial decision and distribution of profits, to implement

and review the internal control system, and to confirm the management organization and the basic management

system of the Company, etc. The duties and powers of the Board and the management have been set out in details

in the Articles.

According to the Articles and the Rules of Procedure for Board Meetings, all Directors are entitled to propose

matters to be included in the agenda for Board meetings. The Company shall deliver a notice to the Directors of

an ordinary Board meeting 14 days before or for an extraordinary Board meeting, three days before the meeting

date; the agenda and information for discussion will be circulated to the Directors for their review five days before

an ordinary Board meeting or three days before an extraordinary Board meeting. Minutes of Board meeting made

the detailed record on the matters considered and the decisions achieved by each Director. Draft and final versions

of minutes of Board meetings will be sent to all Directors for their comments and records respectively, in both

cases within a reasonable time after the Board meeting is held. The Directors may express opinions on the draft

minutes of the meeting and shall keep the final version of the board minutes. Each Director is entitled to inspect

the minutes of Board meetings at any reasonable time.



The Board and each Director has independent channels to communicate with the senior management of the

Company. Any of the Directors is entitled to inspect the files and relative documents of the Board.

The Company has set up a unit under the Board, through which all Directors are able to access the services of the

secretary of the Board. The Board is entitled, at the Company’s expense, to seek independent professional advice

for its Directors in appropriate circumstances. When the Board considers connected transactions, any connected

Director would abstain from voting on such a transaction.

For the year ended 31 December 2010, six Board meetings were held and the Directors attended the meetings

in person or by means of electronic communication. All Directors attended the meetings, representing 100%

attendance of the Board.

Each of the independent non-executive Directors have submitted to the Company an annual confirmation

concerning his independence pursuant to Rule 3.13 of the Hong Kong Listing Rules. The Company confirms that

all of the four independent non-executive Directors comply with the qualification requirements of independent

non-executive Directors as required under the Hong Kong Listing Rules.

Except for their working relationship, there is no financial, business, family or any other material relationship

between the Directors, Supervisors and senior management of the Company.

The Directors are responsible for preparing the Company’s financial accounts as a true and fair reflection of the

Company’s financial situation, operating results and cash flows for the relevant accounting period.

(4) Chairman and Chief Executive Officer

Mr. Li Weimin serves as the Chairman of the Company, and Mr. Zhang Yingmin is the General Manager. The

authorities and responsibilities of the Chairman and the General Manager are clearly divided. Details of such

authorities and responsibilities of the Chairman and the General Manager are set out in details in the Articles.

The relevant systems of the Company ensure that all Directors are properly informed of current issues and are able

to obtain complete, accurate and adequate information in time. The Chairman also has similar responsibility.

(5) Terms of Office of Non-Executive Directors

Each of the non-executive Directors has entered into a service contract with the Company. Pursuant to the

Articles, the term of office of the members of the Board (including the non-executive Directors) is three years.

The members of the Board can be reappointed consecutively after expiry of the term. However, the term of

reappointment of independent non-executive Directors cannot exceed six years.



The duties of the non-executive Director’s include, but are not limited to, the following:

• participate in the Board meetings of the Company, provide independent advice on matters involving

strategy, policy, performance of the Company, accountability, resources, main appointments and codes of

conduct;

• play a leading and guiding role in the event of potential conflicts of interest;

• accept appointments as members of the audit committee, remuneration committee, nomination committee

and other governing committees;

• scrutinize whether the performance of the Company achieves its objectives and targets, supervise and report

the performance of the Company.

(6) Remuneration of Directors

The remuneration policies, remuneration calculation and payment methods of the Directors, Supervisors and

senior management have been included in the paragraph headed “3. Remuneration Policy” under the chapter

headed “Chapter 6 Board of Director, Supervisors, Senior Management and Employees” in this annual report.

The establishment and the operation of the Remuneration Committee of the Board of the Group has been

included in the paragraph headed “II Daily Operations of the Board of Directors” under the chapter headed

“Chapter 4. Report of Board of Directors” in the annual report.

(7) Nomination of Directors

The details of the establishment and operation of the Nomination Committee of the Board are described in the

paragraph headed “2. Daily Operations of Board of Directors” under the Chapter headed “Chapter 4 Board of

Directors, Report” in this annual report.

(8) Auditors’ Remuneration

The details are described in the paragraph headed “7. Appointment and Dismissal of Auditors” under the Chapter

headed “Chapter 10 Significant Events” in this annual report.

(9) Audit Committee

The details are described in the paragraph headed “2. Daily Operations of the Board of Directors” under the

Chapter headed “Chapter 4 Board of Directors’ Report” in this annual report.



(10) Internal Controls

The details are described in the paragraph headed “1. Corporate Governance” under the Chapter headed “Chapter

7 Corporate Governance” in this annual report.

(11) Directors’ Acknowledgment of their Responsibilities in the Preparation of the Company’s

Accounts

All Directors acknowledge their responsibility for preparing the accounts for the year ended 31 December 2010.

(12) Information Disclosure

The Company emphasizes the truthfulness, timeliness, fairness, impartiality and publicity of information

disclosure and has observed the disclosure requirements set out in the Hong Kong Listing Rules. The Chief

Financial Officer shall ensure the financial report and related information disclosed are a truthful and fair

reflection of the Company’s business operations and financial status, applying the applicable accounting standards

and relevant rules and regulations.

Pursuant to the newly-issued supervisory regulations, the Company has amended its relevant regulations in a

timely manner. The amendments to the Information Disclosure Management System of Yanzhou Coal Mining

Company Limited relating to accountability system of significant errors and users of external information were

approved at the thirteenth meeting of the fourth session of the Board held on 26 February 2010.

(13) Investor Relations

1. Continuously Perfecting the Rules for the Management of Investors’ Relationship

Pursuant to the laws and supervisory regulations of both the domestic and overseas places where the

Company’s shares are listed, and based on day-to-day business practices, the Company has developed

and perfected the Rules for the Management of Investors’ Relationship and the Rules for Disclosure of

Information to regulate the management of investor relations.

2. Providing the Investors with the Information Timely and Fairly

The Company has set up standardized and effective information collection, compilation, examination,

disclosure and feedback control procedures to ensure that disclosure of information is in compliance

with governance requirements of places where the Company’s shares are listed, and also to give investors

reasonable access to the Company’s information. The Company actively considers the needs of investors and

strives to enable investors to draw conclusions independently based on the disclosed information.

The Company, through its website, provides investors with the dynamic of the Company, the perfection of

the corporate governance system and the industrial information, realizing the synchronization disclosure of

the Company’s extraordinary announcement, periodic report on the websites of the stock exchanges and the

statutory media.



3. Actively Communicating With the Investors

The Company always welcomes the investors for site investigation with sincere attitude, or makes telephone

communication with investors.

The Company holds at least two international and domestic road-shows every year. Through face-to-

face meetings, the Company reports to investors on its business operations, while collecting opinions and

suggestions in relation to the Company from the investors and the capital markets.

The Company greatly emphasizes communications with Shareholders through Shareholders’ meetings,

and encourages the minority Shareholders to participate in Shareholders’ meetings by various means such

as internet voting. The chairman and the vice chairman of the Board, the general manager, the chairman

and the vice chairman of the Supervisory Committee, and the relevant Directors, Supervisors and senior

management generally attend the Shareholders’ meetings. At the Shareholders’ meetings, each resolution is

proposed separately and all the resolutions are voted by poll.

III. COMPLIANCE WITH AND EXEMPTION FROM CORPORATE GOVERNANCE

STANDARDS IMPOSED BY THE NEW YORK STOCK EXCHANGE(Under the US “Listing Regulations”)

As at the date of this annual report, 52.86% of the Company’s shareholding is owned by Yankuang Group. The

Company is therefore exempted from certain requirements under Section 303A of the Listed Company Manual of the

New York Stock Exchange (the “NYSE”): (1) the Company is not required to comply with Section 303A.01, to form a

Board with a majority of the independent Directors, (2) the Company is not required to comply with Section 303A.04,

to form a nomination and corporate governance committee of the Board with all the members being independent

Directors, and (3) the Company is not required to comply with Section 303A.05, to form a remuneration committee of

the Board with all the members being independent Directors.

As a foreign listed company, set out below are the material differences between the Company’s corporate governance

practices and the NYSE’s corporate governance requirements contained in Section 303A of the Listed Company Manual

of the NYSE:



NYSE Listed Company

Manual Requirements

on Corporate Governance

Differences from the corporate

governance practices currently

adopted by the Company

Meetings held by

non-executive

Directors

Non-executive directors of each

listed company are to meet

regularly without the participation

of executive directors at such

meetings (Section 303A.03)

At present, there is no identical corporate governance

requirement in the PRC.

The Company has established a reporting system for

all the Directors to ensure that the Directors are kept

informed of the Company’s business and operations.

The Company believes that the holding of Board

meetings on a regular basis offers the non-executive

Directors an effective communication forum to raise

their concerns and engage in full and open discussions

regarding the Company’s affairs.

Corporate

Governance

Guidelines

A listed company must adopt and

disclose corporate governance

guidelines. These corporate

governance guidelines should

include:

• qualifications of directors;

• responsibilities and obligations

of directors;

• communications between

directors and the management

and independent advisors;

• remuneration of directors;

• training for new directors

and continuing education of

directors;

• re-appointment of the

management; and

• annual review of the

performance of the board

(Section 303A.09)

Although the Company has not adopted a separate

set of corporate governance guidelines encompassing

all the corporate governance requirements of the

NYSE, the Company has, however, formulated the

Rules of Procedures for the Shareholders’ Meetings,

Rules of Procedures for the Board Meetings, Rules

of Procedures for the Supervisory Committee, Rules

for the Work of the Independent Non-Executive

Directors, Rules for Disclosure of Information, Rules

for the Approval and the Disclosure of the Connected

Transactions of the Company, and other corporate

governance documentation in accordance with the

regulations and requirements of listing in China.

The corporate governance rules and procedures

as detailed above basically covers the corporate

governance requirements of the NYSE, and are of

an even greater scope and in greater detail than the

requirements of the NYSE. This enables the promotion

of the standard operation of the Company.

Code of Business

Conduct and

Ethics

A listed company must adopt and

disclose a code of business conduct

and ethics for directors, officers

and employees, and promptly

disclose any waivers of the code

of business conduct and ethics

for directors or executive officers.

(Section 303A.10)

Although the Company has not adopted a Code

of Business Conduct and Ethics which completely

conforms to the NYSE requirements, the Company

has adopted a suitable Code of Ethics in compliance

with the listing regulatory regulation and requirements

in China. The Code of Business Conduct and Ethics

is found on the Company’s website. The Company

believes that the existing Code of Business Conduct

and Ethics appropriately protects the interests of both

the Company and its Shareholders.


Shareholders’ General MeetingChapter 08

During the reporting period, the information of the Shareholders` general meetings were as follows:

Session and Number of Meeting Date of Meeting Disclosure Date

1 The first 2010 extraordinary Shareholders’ meeting 26 February 2010 1 March 2010

2 The 2009 annual general meeting 25 June 2010 25 June 2010

3 The 2010 first A Shareholders’ class meeting; 25 June 2010 25 June 2010

4 The 2010 first H Shareholders’ class meeting 25 June 2010 25 June 2010


Report of Supervisory CommitteeChapter 09

During the reporting period, all Supervisors of the Company fulfilled their supervising responsibilities, protected the interests

of the Company and the Shareholders, adhered to the principles of prudence and trustworthiness and actively carried out their

duties with care and diligence, pursuant to the PRC Company Law and the Articles.

MEETING OF THE SUPERVISORY COMMITTEE

The Supervisory Committee held four meetings during the reporting period. Details of each of the meetings are as follows:

1. The seventh meeting of the fourth session of the Supervisory Committee was held on 4 January 2010. The Proposal for

Amendments to the Rules of Procedures for the Supervisory Committee of Yanzhou Coal Mining Company Limited was

considered and approved at the meeting.

2. The eighth meeting of the fourth session of the Supervisory Committee was held on 23 April 2010. The Supervisory

Committee’s Report for the Year 2009, the 2009 Annual Report, the Financial Report for the Year 2009, the Profit

Distribution Plan for the Year 2009, the Proposal for the provision of bad debts, Social Responsibility Report 2009,

Evaluation on Implementation of Information Disclosure Management System Report for the Year 2009, and the

Proposal for change in accounting estimate and the First Quarterly Report of 2010 of Yanzhou Coal Mining Company

Limited were considered and approved at the meeting.

3. The ninth meeting of the fourth session of the Supervisory Committee was held on 20 August 2010. The Interim Report

for the Year 2010 was considered and approved at the meeting.

4. The tenth meeting of the fourth session of the Supervisory Committee was held on 22 October 2010. The Third

Quarterly Report of the Year 2010 was considered and approved at the meeting.

The Supervisory Committee has provided its independent opinion on the following matters:

1. Compliance with rules and regulations by the Company and its Operations in 2010

By attending and presenting at meetings of the Board and Shareholders’ general meetings, the Supervisory Committee

has, pursuant to the relevant laws and regulations, carried out investigatory and supervisory functions on matters

such as the resolutions of and the procedures on convening the meetings of the Shareholders and the Directors, the

implementation of the resolutions of the Shareholders’ meetings by the Board, the performing of duties by the senior

management and the management system of the Company. No breach of law, regulations or the Articles has occurred.

No breach of laws and regulations by the Directors and senior management of the Company in the course of performing

their duties have occurred.

The Supervisory Committee of the Company has reviewed the Self-assessment Report on the Internal Control System

for 2010 of Yanzhou Coal Mining Company Limited and found that there is no objection to the content.

The Supervisory Committee considers that the performance of the Board and management in 2010 was in compliance

with the relevant PRC laws and regulations and the Articles, and that it has been serious, responsive and systematic in its

decision-making procedures. The internal control system implemented effectively.


Chapter 09 Report of Supervisory Committee

2. Examination of the financial condition of the Company

The Supervisory Committee has examined the financial condition and operation results of the Company for the

reporting period. The Supervisory Committee considers that the contents and format of the Company’s financial

statements are in compliance with all applicable rules. Further, the information accurately and objectively reflected the

Company’s financial condition and operating results for the reporting year. The financial results are true, and all costs,

expenses and provisions have been incurred and made in accordance with the relevant laws, regulations and the Articles.

3. Usage of Funds Raised

During the reporting period, there were no funds raised by the Company and there were no previously raised funds

being used for the current projects invested in by the Company.

4. Fairness of Asset Acquisitions

During the reporting period, the trading and pricing terms for acquisitions of equities and assets by the Company were

fair and there were no insider dealings and transactions which prejudized the interests of Shareholders and resulted in

any capital loss to the Company.

5. Connected Transactions

During the reporting period, the connected transactions between the Company and the Controlling Shareholder and its

subsidiaries were fair, reasonable, lawful and did not prejudized the interests of the Shareholders.

Song Guo

Chairman of the Supervisory Committee

Zoucheng, the PRC

25 March 2011


Significant EventsChapter 10

I. MATERIAL EVENTS

(1) Litigation and Arbitration

The Company was not involved in any significant litigation or arbitration during the reporting period.

(2) Repurchase, Sale or Redemption of Shares of the Company

The Shareholders at the 2009 Annual General Meeting, the 2010 first A Shareholders’ meeting and the 2010 first H

Shareholders’ meeting all held on 25 June 2010, respectively, resolved and granted the Board a repurchase general

mandate. Subject to the approvals of the relevant regulatory authorities and the relevant laws, regulations and

the Articles, the Board may, during the relevant period, make the necessary decision based on the needs and the

market conditions to repurchase H Shares not exceeding 10% of the total amount of existing issued H Shares as at

the date of passing of the repurchase mandate resolutions.

As at the disclosure date of this annual report, the Company has not exercised the general mandate to repurchase

H Shares.

II. SHARES OF OTHER LISTED COMPANIES AND FINANCIAL CORPORATIONS HELD

BY THE COMPANY

As at 31 December 2010, the external equity investments made by the Company are set out as follows:

Investment Book value at the

Stock Number of % of share capital cost at the Accounting end of the reporting Current income

No Stock code abbreviation shares held (share) of the company beginning (RMB) items period (RMB) (RMB)

1 600642 Shenergy 24,333,051 0.77% 60,420,274 Financial assets 185,661,179 4,464,780

available-for-sale

2 601008 Lianyungang 1,380,000 0.26% 1,760,419 Financial assets 8,597,400 39,316

available-for-sale

Total 62,180,693 194,258,579 4,504,096

Source of Shenergy shares: agreement for the transfer of public corporate shares in 2002, bonus issue shares in 2004 and

subscription of placing shares of 2,009,151 on 15 October, 2010 with the owned cash of RMB16,856,776.89.

Source of Lianyungang shares: subscription as shares as promoter upon establishment of the Company and bonus issue

shares in 2007.

Save as disclosed above, the Company has made no equity investments in other listed companies or financial enterprises

as at the reporting date.


Chapter 10 Significant Events

III. SHARE INCENTIVE SCHEME

The Company did not have any share incentive scheme during the reporting period.

IV. ASSET ACQUISITION, SALES AND MERGERS

(1) Acquisition of Coal Mine Assets and Shares of Ordos Areas in Inner Mongolia

Upon approval at the general manager working meeting held on 1 December 2009, the Company established

Ordos Neng Hua on 18 December 2009 as a wholly owned subsidiary in Inner Mongolia Autonomous Region

with a capital of RMB 500 million. Ordos Neng Hua will act as an investment management platform of the

company for coal mining, coal chemicals and a coal power project in Inner Mongolia.

Subsequently, the Company and Ordos Neng Hua successively launched the related acquisitions: acquisition

of 100% equity interests in a 0.6 million tonnes methanol project, the acquisition of 51% equity interest in

Haosheng Company, the acquisition of the assets of Anyuan Coal Mine and the obtaining the mining rights of

Zhuan Longwan Coal mine field through public bidding. All these efforts are favor to Company in acquiring coal

resources in Ordos City, further participating in coal resources development in the Inner Mongolia Autonomous

Region and enhancing the sustainable development ability and core competitiveness of the Company.

1. Acquisition of 100% equity interest in the 0.6 million tonnes methanol project

Upon approval at the general manager working meeting held on 1 December 2009, Ordos Neng Hua

acquired the 100% of equity interests held by Kingboard Chemical Holdings Limited in “Inner Mongolia

Rongxin Chemicals Co., Ltd”, “Inner Mongolia Daxin Industrial Gas Co., Ltd” and “Inner Mongolia Yize

Mining Investment Co., Ltd”, for a consideration of RMB190 million out of its own resources. The relevant

procedures for the share ownership transfer procedures were completed on 16 April 2010. The above

companies are responsible for the establishment of the phrase one of the 0.6 million tonnes methanol project

on the first stage.

The consideration of RMB190 million represented approximately 1.56% of the audited total profits of the

Group of RMB12.1138 billion of 2010 under PRC CASs.


Chapter 10Significant Events

2. Acquisition of 51% equity interest in Inner Mongolia Haosheng Coal Mining Company Limited

Upon approval at the fifteenth meeting of the fourth session of the Board held on 20 August 2010, the

Company entered into the equity transfer agreement of Inner Mongolia Haosheng Coal Mining Company

Limited and its Supplementary Agreement on 6 September 2010 and 19 October 2010, respectively. It was

agreed that: (i) the consideration for an aggregate 51% equity interest held by Shanghai Huayi (Group)

Company, Ordos Jinchengtai Chemical Co., Ltd and Shandong Jiutai Chemical Industrial Technology

Company Limited in Haosheng Company was RMB 6.649 billion; (ii) the Company and other shareholders

of Haosheng Company to inject further capital on a pro-rata basis so as to increase the registered capital

from RMB50 million to RMB150 million.

At present, Haosheng Company is mainly responsible for the approval application for the mining project

and the grant of the mining rights of Shilawusu Coal Mine field Project in the Inner Mongolia Dongsheng

Coal Field.

The initial payment of the consideration and capital increase in Haosheng Company with a total amount

of RMB2.0458 billion was paid by the Company on 20 October 2010 and the share ownership transfer

procedures were completed on 4 November 2010. The second payment of RMB2.6596 billion shall be

paid by the Company within 15 working days upon any of the following requirements has been met:

(i) Haosheng Company obtaining the exploration rights license of Shilawusu Coal Mine field; (ii) the

mining zone delineation of Shilawsu Coal Mine Zone or other applications related to mining rights have

been approved by the Ministry of Land and Resources (the main body to have obtained the mining zone

delineation or other mining rights must be Haosheng Company). The third payment of RMB1.9947 billion

shall be paid within 10 months after completion of the second payment.

The consideration and the amount of capital increase undertaken by the Company for the acquisition was

RMB6.7 billion, representing approximately 55.31% of the audited total profits of the Group of RMB12.1138

billion of 2010 under PRC CASs.

For details, please refer to the announcements in relation to acquisition of equity interest in Haosheng

Company of Yanzhou Coal Mining Company Limited published on 6 September 2010. The above disclosure

information was also posted on the Shanghai Stock Exchange’s website, the Hong Kong Stock Exchange’s

website, the Company’s website and/or PRC newspaper, China Securities Journal and Shanghai Securities

news.



3. Acquisition of Anyuan Coal Mine

Upon approval at the general manager working meeting held on 12 November 2010, Ordos Neng Hua

entered into the “Anyuan Coal Mine Transfer Agreement” and “the Supplementary Agreement to Anyuan

Coal Mine Transfer Agreement” (collectively, “Anyuan Coal Mine Transfer Agreement”) dated on 20

November 2010 and 20 January 2011, respectively, and acquired the total assets of Anyuan Coal Mine, for an

agreed total consideration of RMB1.435 billion.

Pursuant to the “Anyuan Coal Mine Transfer Agreement”, Anyuan Coal Mine was taken over by Ordos

Neng Hua on 1 December 2010. Commencing from 1 December 2010, the coal produced and earnings

derived from Anyuan Coal Mine belong to Ordos Neng Hua. As at the disclosure date of this report, RMB

1.29 billion has been paid by Ordos Neng Hua, and the balance payment is expected to be paid in July 2011.

Anyuan Coal Mine is located in Ejin Horo Banner of Ordos City, and is an underground coal mine. Anyuan

Coal Mine covers an area of 9.26 km2 and with reserves of 40.51 million tonnes and recoverable reserves

of 20.47 million tonnes. Its designed annual production capacity is 0.6 million tonnes of raw coal. The

Department of Coal Industry of Inner Mongolia Autonomous Region has approved the increase in annual

production capacity of the mine to 1.2 million tonnes. Presently, expansion and acceptance inspection

procedures of the coal mine are in the process.

Anyuan Coal Mine is an ordinary partnership enterprise, the mining rights license and amendments to the

registration of the operating assets of which are in the progress.

The consideration for the acquisition of RMB1.435 billion, represents approximately 11.84% of the audited

total profits of the Group of RMB12.1138 billion of 2010 under PRC CASs.



4. Bidding for Mining Rights of Zhuan Longwan Coal Mine Field

Upon approval at the nineteenth meeting of the fourth session of the Board held on 28 January 2011, Ordos

Neng Hua successfully bid the mining rights of Zhuan Longwan coal mine field of Dongsheng Coal Field in

Inner Mongolia Autonomous Region for a consideration of RMB7.8 billion. The first installment (40% of

the total consideration) of RMB3.12 billion and service fees of RMB78.655 million were paid by Ordos Neng

Hua on 25 February 2011. The second installment (30% of the total consideration) of RMB2.34 billion shall

be paid in full before 30 November 2011. The third installment (30% of the total consideration) of RMB2.34

billion shall be paid in full before 30 November 2012.

Pursuant to the “Announcement in relation to Public Auction of the Mining Rights of Zhuan Longwan

Coal Mine field of Dongsheng Coal Field” issued by the Department of Land and Resources of the Inner

Mongolia Autonomous Region, the coal mining field of Zhuan Longwan coal mine covers an area of 43.50

km2 and with reserves of 548 million tonnes; the coal is premium coal with very low-ash, very low-phosphor,

very low-sulfur and medium-high-calorific value. Extra large mines with a designed production capacity of 5

million tonnes per year can be constructed in the coal mine field.

The Department of Land and Resources of the Inner Mongolia Autonomous Region was entrusted by

the Ministry of Land and Resources of the PRC to conduct the auction. At present, Ordos Neng Hua is

undertaking the application procedure for the mining rights of Zhuan Longwan coal mine zone. Pursuant

to the articles of association of the Company, the Company will arrange for shareholders’ approval and

ratification of the bidding at the 2010 annual general meeting of the Company.

The consideration for the acquisition was RMB7.8 billion, representing approximately 64.39% of the audited

total profits of the Group of RMB12.1138 billion of 2010 under PRC CASs.

For details, please refer to the “Announcements in relation to external Investment and Obtaining of Mining

Rights by a wholly-owned subsidiary of Yanzhou Coal Mining Company Limited” dated on 28 January 2011.

The above information disclosure was also posted on the Shanghai Stock Exchange’s website, the Hong

Kong Stock Exchange’s website, the Company’s website and/or PRC newspaper, China Securities Journal

and Shanghai Securities news.



(2) Acquisition of 30% Equity Interests in Ashton Coal Mine Joint Venture in Australia

Upon approval at the seventeenth meeting of the fourth session of the Board held on 30 December 2010,

Yancoal Australia through a subsidiary company, paid USD250 million to acquire the 30% of the equity interests

held indirectly by Singapore IMC Group in the Ashton Coal Mine Joint Venture. Upon this completion, the

Company’s control in the Ashton Coal Mine Joint Venture has increased from 60% to 90%.

Ashton Coal Mine is located in Hunter Valley, New South Wales, Australia and consists of an open-cut coal mine

and an underground coal mine, with annual designed production capacity of 5.20 million tonnes of raw coal.

According to an assessment based on the Australian JORC Code, the aggregate coal reserves of Ashton Coal Mine

amounted to 96.50 million tonnes. The types of coal are semi-soft coking coal and premium thermal coal with

characteristics of low ash and high calorific value.

The consideration for the acquisition was USD250 million (approximately RMB1.664 billion), representing

approximately 13.74% of the audited total profits of RMB12.1138 billion of 2010 under PRC CASs.

As at the disclosure date of this annual report, the above acquisition has been approved by the Foreign Investment

Review Board of Australia and the National Development and Reform Commission of the PRC. At present,

approvals are being obtained from the PRC governmental authorities.

(3) Disposal of 51% Equity Interests in Minerva Coal Mine Joint Venture in Australia

Upon approval at the seventeenth meeting of the fourth session of the Board held on 30 December 2010, a wholly-

owned subsidiary of Yancoal Australia disposed its 51% equity interests in the Minerva Coal Mine Joint Venture

to a subsidiary of Sojitz Corporation in Australia for a consideration of AUD201 million. Upon completion of

disposal, the Company no longer has any interest in the Minerva Coal Mine Joint Venture.

Minerva Coal Mine is located in Bowen Basin, Queensland. Minerva Coal Mine is an open-cut coal mine, with

annual production capacity of 2.80 million tonnes of raw coal. According to an assessment based on the Australia

JORC Code, the aggregate coal resources of Minerva Coal Mine amounted to 76 million tones, with reserves of

23.6 million tonnes. The type of coal is thermal coal.

The consideration received from the disposal was AUD201 million (approximately RMB1.322 billion),

representing approximately 10.91% of the audited total profits of the Group of RMB12.1138 billion of 2010 under

PRC CASs.



V. MAJOR CONNECTED TRANSACTIONS

The Group’s connected transactions were mainly made with its Controlling Shareholder (including its subsidiaries) in

respect of the mutual provisions of materials and services and asset purchase transactions.

(1) Continuing connected transactions

Upon the restructuring of the Company for listing, the Controlling Shareholder injected its major coal production

and operation assets and related business into the Company, while the remaining businesses and assets of the

Controlling Shareholder continue to provide products, materials, services and logistics support services to the

Company. Besides, upon the commencement of its formal operation, Yankuang Group Finance Company Limited

(a subsidiary of the Controlling Holder) provides financial services, such as deposits, borrowings and settlement

services, to the Group. As the Controlling Shareholder and the Company are both located in Zoucheng City,

Shandong Province, the Group is able to obtain a steady, stable and continuing source of materials, ancillary

support services, financial and other services from the Controlling Shareholder, which can alleviate the operational

risk, financing cost and financing risk and which in turn benefits the Company’s daily operations. The Group

supplies products and materials to the Controlling Shareholder at market prices, thereby ensuring a stable sales

market to the Company. The above connected transactions are necessary and continuing.

At the second extraordinary general meeting held on 23 December 2008, the five continuing connected

transaction agreements, namely, the “Provision of Materials Agreement”, “Provision of Labor and Services

Agreement”, “Provision of Pension Fund Management Service”, “Provision of Products and the Materials

Agreement” and “Provision of Electricity and Heat Energy Supply Agreement”, together with the annual caps for

such transactions form 2009 to 2011 had been approved. Such transactions are continuing connected transactions

entered into between the Company and its Controlling Shareholder in the ordinary course of business. Prices of

these transactions are mainly determined by the price fixed by the State, and if there is no State price available, the

market price is used. If there is no market price available, then the actual cost is applied. The charge for supplies

can be settled in one lump sum or by installments. The continuing connected transactions made in a calendar

month shall be settled in the following month, except those transactions which are not yet completed or those

amounts are in dispute.

Upon approval at the fourteenth meeting of the fourth session of the Board of the Company held on 23 April 2010,

the Company and Yankuang Group Finance Company Limited entered into the “Financial Service Agreement”.

The parties agreed on the terms of the continuing connected transactions including the deposits, borrowings,

settlement and the proposed annual caps for the transactions from 2010 to 2011. It has been confirmed that the

rates for the fees charged by the Yankuang Group Finance for the financial services to be provided to the Group

shall equal to or more favorable than those charged by the major commercial banks in the PRC for the same kind

of financial services provided to the Group. Fund risk control measures were also taken to safeguard the security of

the fund from system’s perspective.



1. Continuing connected transaction of the supply of materials and services

(the listed figures are under PRC CASs)

The sales of goods and rendering of services by the Group to its Controlling Shareholder amounted to

RMB3.3617 billion in 2010. The goods and services provided by the Controlling Shareholder to the Group

amounted to RMB2.259 billion.

The following table sets out the connected transactions of the supply of materials and services between the

Group and the Controlling Shareholder in 2010:

2010 2009

Percentage Percentage Increase/decrease

of operating of operating of connected

Amount income Amount Income transactions

(RMB’000) (%) (RMB’000) (%) (%)

Sales of goods and rendering of

services by the Group to its

Controlling Shareholder 3,361,680 9.65 2,608,082 12.13 28.89

Sales of goods and rendering of

services by the Controlling

Shareholder to the Group 2,258,967 6.48 2,144,198 9.97 5.35

The table below shows the effect on profits from sales of coal by the Group to the Controlling Shareholder in

2010:

Sales income Operation cost Gross Profits

(RMB’000) (RMB’000) (RMB’000)

Coal sold to the Controlling Shareholder 2,672,424 1,295,783 1,376,641

2. Continuing connected transaction of pension fund

As approved at the second 2008 extraordinary Shareholders’ meeting and according to the Pension Fund

Management Agreement and the annual transaction caps thereunder from 2009 to 2011, the Controlling

Shareholder shall provide free management and handling services for the Group’s endowment insurance

fund, medical insurance fund, supplementary medical insurance fund, unemployment insurance fund and

maternity insurance fund (the “Insurance Fund”). The amount of the Insurance Fund paid by the Group in

2010 was RMB1,045.3 million.



3. Signing the Financial Service Agreement with Yankuang Group Finance Company Limited

Pursuant to the “Financial Service Agreement” signed between both parties, the annual transaction caps

from 2010 to 2011 for the continuing connected transactions of financial services provided by Yankuang

Group Finance Company Limited to the Group are as follows:

(1) The maximum daily balance (including accrued interests) of the Group on the settlement account in

Yankuang Group Finance Company Limited shall not exceed RMB1.4 billion each year.

(2) Yankuang Group Company Limited Finance shall provide a credit facility limit of RMB1 billion

(including accrued interests) to the Group each year;

(3) Total fees for the discounted note services and other financial services such as settlement services: the

annual cap each year is RMB28.54 million, in which, the annual cap for discounted note service fees is

RMB20.94 million.

For further details, please refer to the “Announcements in relation to the Resolutions Passed at the

Thirteenth Meeting of the Third Session of the Board”, “Announcements in relation to the Resolutions

Passed at the Fourteenth Meeting of the Fourth Session of the Board” and the “Announcement on

Connected Transactions of Yanzhou Coal Mining Company Limited” dated 3 August 2007, 23 April 2010

and 7 January 2011 respectively. These announcements have been posted on the websites of the Shanghai

Stock Exchange, Hong Kong Stock Exchange and the Company, and/or within the PRC newspapers, namely

the China Securities Journal and Shanghai Securities News.

As at 31 December 2010, the balance deposit of the Group in Yankuang Group Finance Company Limited

was RMB1.4 billion, representing 15.9% of the total bank deposit of the Group as at the end of 2010.

Save as disclosed above, no other continuing connected transactions of financial services occurred between

the Group and Yankuang Group Finance Company Limited in 2010.

Details of the annual transaction cap for 2010 and the actual transaction amounts in 2010 for the above

continuing connected transactions are shown in the following table.



Annual cap Value of

No Type of connected transaction Agreement for the year 2010 for the year 2010

(RMB’000) (RMB’000)

1 Material and facilities provided Provision of Materials Agreement 600,000 421,606

by Yankuang Group

2 Labor and services provided by Provision of Labour and Services 2,356,820 1,837,361

Yankuang Group Agreement

3 Pension fund management and Provision of Pension Fund 1,209,600 1,045,296

payment services provided by Management Service Agreement

Yankuang Group for the Group’s staff

4 Coal and material provided to Provision of Products and 4,070,000 3,126,678

Yankuang Group Material Agreement

5 electricity and heat provided to Provision of Electricity Heat Agreement 334,000 235,002

Yankuang Group

6 Financial services provided by Financial Services Agreement

Yankuang Group:

(1) deposit balances 1,400,000 1,400,000

(2) loan facility 1,000,000 0

(3) financial services fees 28,540 0

4. Opinion of the Independent Non-executive Directors

The Company’s independent non-executive Directors have reviewed the Group’s continuing connected

transactions with the Controlling Shareholder for the year 2010 and confirm that: (1) all such connected

transactions have been: (i) entered into by the Group in its ordinary and usual course of business; (ii)

conducted either on normal commercial terms, or where there are not sufficient comparable transactions to

judge whether they are on normal commercial terms, on terms no less favorable to independent third parties

than terms available to or from the Group; and (iii) entered into in accordance with the relevant governing

agreement on terms that are fair and reasonable and in the interests of the Shareholders as a whole; (2) the

value of the connected transactions in respect of the continuing supply of materials and services stated under

the paragraph headed “1. Continuing connected transaction of the supply of materials and services” above

has not exceeded the annual transaction caps for the year 2010 approved by independent Shareholders and

the Board.

5. Opinion of the Auditors

Pursuant to Rule 14A.38 of the Hong Kong Listing Rules, the Directors have engaged the auditors of

the Company to perform certain procedures required by the Hong Kong Listing Rules in respect of the

continuing connected transactions of the Group. The auditors have reported to the Directors that the above

continuing connected transactions: (1) have received the approval of the Board; (2) are in accordance with

the pricing policies of the Company; (3) have been entered into in accordance with the relevant agreement

governing the transactions; and (4) have not exceeded the relevant annual caps.



(2) Purchase of assets transaction

Mining Rights Consideration for Jining III Coal Mine

Pursuant to the “Acquisition Agreement of Jining III Coal Mine” entered into between the Company and

Yankuang Group in 2000, the consideration for the mining rights of Jining III Coal Mine is approximately

RMB132.5 million, which shall be paid to Yankuang Group in ten equal installments, free of interest, commencing

from 2001. The Company paid a total of RMB13.248 million for the mining rights to Yankuang Group in 2010. As

at the reporting period, the total of RMB132.5 million for the mining rights of Jining III Coal Mine has been paid

in full.

(3) External Connected Transactions entered into jointly by the Group and related parties

1. Equity Participation in Yankuang Group Finance Company Limited

As approved at the thirteenth meeting of the third session of the Board held on 3 August 2007, Yankuang

Group Finance Company Limited was jointly established by the Company with Yankuang Group and China

Credit Trust Co. Ltd and Investment Company Limited on 13 September 2010. The registered capital of the

company is RMB500 million, of which Yanzhou Coal contributed RMB125 million in cash, representing

an equity interest of 25%. Yankuang Group Finance Company Limited commenced its operations on 1

November 2010. Its principal activities include: accepting deposits from members; inter-bank borrowing;

and making the bill acceptance and discount for the members etc.

2. Establishment of Shaanxi Future Energy Chemical Corp. Ltd as a Joint Stock Company

As approved at the seventeenth meeting of the fourth session of the Board held on 30 December 2010,

Shaanxi Future Energy Chemical Corp. Ltd (“Future Energy”) was jointly established by the Company,

Yankuang Group and Shaanxi Yanchang Petroleum (Group) Corp. Ltd on 25 February 2011. The registered

capital of Future Energy is RMB5.4 billion, in which Yanzhou Coal will contribute RMB1.35 billion in cash,

representing an equity interest of 25%. The registered capital will be paid in full in 3 stages before August

2012. Future Energy will mainly engage in investment and participation in the coal liquefaction project in

Shaanxi Province as well as the preparation for development of ancillary coal mines.

For details, please refer to the “Announcements in relation to the Resolutions passed at the Seventeenth

Meeting of the Fourth Session of the Board of Yanzhou Coal Mining Company Limited” and

“Announcement in Relation to the Connected Transaction of Yanzhou Coal Mining Company Limited” on

30 December 2010 and 24 January 2011 respectively. The above was announcement has also been posted on

the Shanghai Stock Exchange’s website, the Hong Kong Stock Exchange’s website, the Company’s website

and/or PRC newspaper, China Securities Journal and Shanghai Securities news.



(4) Debt and debt obligations due between the Group and the Controlling Shareholder are mainly

due to the mutual provisions of materials and services and the acquisition of assets.

Balances due from/to the Controlling Shareholder between the Group and the Controlling Shareholder in 2010 are

detailed as follows

Payable to related parties Receivable from related parties

Amount involved remaining Amount involved remaining

Related parties (RMB’000) (RMB’000) (RMB’000) (RMB’000)

Yankuang Group 3,595,591 924,623 3,502,519 1,363,406

Up to 31 December 2010, the Controlling Shareholder or its subsidiaries had not used the Group’s funds for non-

operational matters.

Details of the Group’s connected transactions prepared in accordance with the IFRS are set out in note 46 to the

consolidated financial statements herein, or note 9 as prepared in accordance with the PRC CASs. The various

related transactions set out in Note 46 to the consolidated financial statements prepared in accordance with the

IFRS, or Note 9 as prepared in accordance with PRC CASs, also fall under the definition of continuing connected

transactions in Chapter 14A of the Listing Rules of the Hong Kong Stock Exchange.

Other than the material connected transactions described in this section, the Group was not a party to any

material connected transactions during the reporting period.



VI. MATERIAL CONTRACTS & PERFORMANCE

(1) During the reporting period, the Company was not involved in any trust arrangement, contract or lease of other’s

assets or other’s trust arrangement, contract or lease involving the Company’s assets that contributed more than

10% (including 10%) of the total profits of the Company for the year.

(2) Guarantees arising during the reporting period

During the reporting period, Yancoal Australia Pty Ltd, a wholly-owned subsidiary of the Company, provided

a guarantee of AUD14.6182 million (equivalent to RMB96,3223 million) to its subordinate holding companies,

which accounted for 0.26% of the audited net assets of RMB36.808 billion of Yanzhou Coal under PRC CASs.

At the Company’s 2009 first extraordinary general meeting held on 30 October 2009, the “Resolution Relating to

the Acquisition of 100% Equity Interest in Felix” was approved.

1. On 16 October 2009, Yancoal Australia entered into a financing agreement with Bank of China, Sydney

Branch, State Development Bank, Hong Kong Branch and China Construction Bank, Hong Kong Branch,

for a loan of USD2,900 million for the purpose of the Felix acquisition project.

2. On 9 December 2009, Yancoal Australia and Bank of China, Sydney Branch entered into a financing

agreement for provision of a loan of USD140 million by Bank of China, Sydney Branch for the Felix

acquisition project.

The Company guaranteed the above total acquisition financing of USD3, 040 million and the sum guaranteed

represents 73.2% of the audited net asset value of the Company as at 31 December 2009 of RMB28.3578 billion,

calculated in accordance with the PRC CASs. Yankuang Group counter-guaranteed the Company’s guarantee.

Prior to the acquisition of Felix by Austar Company, Felix provided guarantees amounting to AUD45.0671 million

to its subsidiaries and jointly controlled entities for production and operation purposes, in which guarantees were

extended and remained valid during the reporting period.

For details, please refer to “Overseas Regulatory Announcement-Report on Material Assets Reorganization

(revised) of Yanzhou Coal Mining Company Limited” dated on 13 December 2009 and “Overseas Regulatory

Announcement-Implementation of the Material Assets Reorganization of Yanzhou Coal Mining Company

Limited” dated on 28 December 2009. The announcement and circular have been posted on the Shanghai Stock

Exchange’s website, the Hong Kong Stock Exchange’s website, the Company’s website and/or PRC newspaper in

the China Securities Times and Shanghai Securities News.

Save as disclosed above, there were no other guarantee contracts or outstanding guarantee contracts of the

Company during the reporting period; there were no other external guarantees during the reporting period.

(3) During the reporting period, there were no entrustment of funds/assets for management by others.



(4) Entrusted loans provided during the reporting period and entrusted loans previously provided which were

carried forward to the reporting period are set out in the following table. Save as disclosed in the below table, the

Company currently has no other plans to provide entrusted loans.

No. Borrower

Amount of

Entrusted Loan Approved Period

Interest per

annum Approval Process

Whether there is

a provision for

devaluation

Whether

principal has

been recovered

Accumulated interest

income during the

reporting period

1 Yancoal Australia

Pty Limited

USD90 million From 7 November

2005 to 7 November

2010

2.26% ~ 4.67% Reviewed and approved at a

board meeting held on 28 June

2005

Reviewed and approved extension

of repayment date for one year

at a board meeting held on 17

August 2007


of repayment date for two years


October 2008

No Recovered

US$4.5

Million on 31

March 2008.

Recovered

deposit

USD20 million

on

31 October 2009

USD1,746,168

2 Yanzhou Coal

Yulin Neng

Hua Company

Limited

RMB500

million

From 17 May 2007 to

17 May 2010.

Withdrew RMB500

million via 10 draw

downs

6.45% Reviewed and approved at

a board meeting held on 25

October 2006


of repayment date for two years at

a meeting of the general managers

held on 24 May 2010

Reviewed and approved wavier of

interest payments repayment date

for two year at a meeting of the

general managers held on 28 July

2010

No No Nil

3 Yanmei Heze

Neng Hua

Company

Limited

RMB500

million

From 11 April 2008 to

22 November 2012

6.45% Reviewed and approved at a work

meeting of general managers held

on 27 July 2007

Reviewed and approved to

convert RMB 500 million into

share capital of the Company at

twentieth meeting of the fourth

session of the Board

No Converted into

share capital of

RMB500 million

RMB7,280,000



No. Borrower

Amount of


Interest per


Whether there is

a provision for

devaluation

Whether

principal has

been recovered


income during the

reporting period

4 Shanxi Tianhao

Chemicals

Company

Limited

RMB190 million From 28 March 2008 to

22 November 2012.

Withdrew RMB

182,903,552.35 via 12

draw downs



on 27 July 2007


interest payments for year 2010 at


held on 31 December 2010

182,903,552.35 No Nil

5 Yanzhou Coal

Yulin Neng

Hua

Company

Limited

RMB1,500 million From 15 October 2007

to 15 October 2012.

Withdrew RMB1,500

million via 29 draw

downs

6.45% Reviewed and approved at a

board meeting held on 17 August

2007




held on 31 December 2010

No No Nil

6 Shanxi Heshun

Tianchi

Energy

Company

Limited

RMB50 million From 24 December

2007 to 24 June 2012



on 5 November 2007


interest payments repayment date

for one and half year at a meeting

of the general managers held on

31 December 2010

No No RMB2,754,722.22

7 Yanmei Heze

Neng Hua

Company

Limited

RMB

850 million

From 11 April 2008

to 25 February 2013.

Withdrew RMB850

million via 6 draw

downs



on 14 January 2008






No RMB 850 million

already converted

into share capital

of the Company

RMB12,376,000

8 Shanxi Heshun

Tianchi

Energy

Company

Limited

RMB80 million From 15 October 2008

to 15 October 2010.

Withdrew RMB80

million via 5 draw

downs



on 21 August 2008


of repayment date for one year


December 2010

No No RMB4,407,555.56



No. Borrower

Amount of


Interest per


Whether there is

a provision for

devaluation

Whether

principal has

been recovered


income during the

reporting period

9 Shanxi Heshun

Tianchi

Energy

Company

Limited


2008 to 30 December

2010



on 15 December 2008

No Yes RMB894,000

10 Yanmei Heze

Neng Hua

Company

Limited

RMB529

million

From 24 June 2009

to 27 February 2014.

Withdrew RMB529

million via 8 draw

downs



on 23 February 2009






No RMB 150 million

already converted

into share capital

of the Company

RMB21,737,584.44

11 Shandong Hua

Ju Energy Co.

Limited

RMB200

million

From 16 March 2009 to

16 March 2012



on 23 February 2009

No Yes RMB4,068,000

12 Yanzhou Coal

Yulin Neng

Hua

Company

Limited

RMB130

million

From 16 April 2009

to 16 March 2012

Withdrew RMB130

million via 8 draw

downs



on 23 March 2009




held on 28 July 2010

No No Nil

13 Shanxi Heshun

Tianchi

Energy

Company

Limited

RMB20 million From 17 April 2009 to

13 April 2010



on 7 April 2009

No Yes RMB333,350

14 Shanxi Heshun

Tianchi

Energy

Company

Limited


2009 to

28 December 2011

Withdrew RMB40

million



on 21 December 2009

No Yes RMB1,410,833.33



No. Borrower

Amount of


Interest per


Whether there is

a provision for

devaluation

Whether

principal has

been recovered


income during the

reporting period

15 Yanzhou Coal

Yulin Neng

Hua

Company

Limited

RMB200 million From 19 January 2010

to 19 January 2013

Withdrew RMB195

million via 4 draw

downs



on 31 December 2009




held on 28 July 2010

No Recovered

RMB34 Million

Nil

16 Yanmei Heze

Neng Hua

Company

Limited

RMB600 million From 3 June 2010 to 3

June 2015

Withdrew RMB450

million via 3 draw

downs



on 24 May 2010

No No RMB11,051,000

17 Yanmei Heze

Neng Hua

Company

Limited

RMB1,700 million From 15 March 2011

to 15 March 2016

Withdrew RMB150

million via 3 draw

downs

6.45% Reviewed and approved at

twentieth meeting of the

seventeenth session of the Board

on 30 December 2010

No No Nil

18 Yanzhou Coal

Ordos Neng Hua

Company Limited

RMB1,950 million From 18 February 2011

to 18 February 2016

Withdrew RMB1950

million via 4 draw

downs



on 22 February 2011

No No Nil



As approved at the general managers working meeting held on 22 January 2007, Shanxi Neng Hua provided

RMB200 million entrusted loan to Tianhao Chemicals details of which are shown in the following table:

No. Borrower

Amount of

Entrusted Loan Term of Loan

Interest per


Whether there

is a provision

for devaluation

Whether

principal has been

recovered


income during the

reporting period

1 Shanxi

Tianhao

Chemicals

Company

Limited

RMB 200

million

From 29 March

2007 to 28

March 2012.

Withdrew

RMB200

million via 3

draw downs.

6.45% Reviewed and

approved at the work

meeting of general

managers held on 22

January 2007

No No –

(5) Other Material Contracts

Save as the disclosed in the section headed “Disclosure of Significant Events”, the Company was not a party to any

other material contracts during the reporting period.



VII. APPOINTMENT AND DISMISSAL OF AUDITORS

As approved at the 2009 annual general meeting of Yanzhou Coal Mining Company Limited held on 25 June 2010,

Grant Thornton (the “Grant Thornton”) and ShineWing Certified Public Accountants (the “ShineWing”) were

appointed as the Company’s international and domestic auditors, respectively, for the year ended 31 December 2010. As

approved at the first extraordinary general meeting held on 18 February 2011, Grant Thornton Jingdu Tianhua (“Jingdu

Tianhua”) was appointed as the international auditors of the Company and its subsidiaries and should hold office until

the conclusion of the 2010 annual general meeting of the Company.

During the reporting period, as approved at the general meeting, the Board was authorized to approve and pay auditors’

remuneration. The Company is responsible for auditors’ accommodation and meal expenses, but not any other related

expenses.

The Auditors’ remunerations for the years 2010 and 2009 are listed as follows:

Item 2010

(RMB’000)

2009

(RMB’000)

Fees for auditing and reviewing the financial statements and

internal controls of the Company7,300 6,960

Service fees for annual review and evaluation of the internal

controls of Yancoal Australia Pty LimitedAUD0.8 million AUD0.61 million

Consultation fee for the acquisition Felix project – AUD0.15 million

The Board is of the view, other than the annual auditing fees, the other services fee paid by the Group to the Reporting

Accountants will not have any impact on the independency of the auditors’ opinion.

ShineWing has been the Company’s domestic auditors since June 2008. Grant Thornton has been the Company’s

international auditors from June 2008 to 30 December 2010 and Grant Thornton Jingdu Tianhua (“Jingdu Tianhua”)

has been the Company’s international auditors since 30 December 2010.



VIII. UNDERTAKINGS

The share reform plan was implemented by the Company on 31 March 2006. Yankuang Group, as the original non-

tradable Shareholder, made the following special undertakings during the process of implementation of the share reform

plan, the performance of which are set out as follows:

Name of

Shareholder Content of undertaking Performance of undertaking

Yankuang

Group

(1) The previously non-tradable shares of the Company

held by Yankuang Group should not be listed for trading

purpose within forty-eight months from the date of

execution of the relevant share reform plan;

The undertaking has already

been performed.

(2) In 2006, Yankuang Group would transfer part of its

operations and new projects relating to coal and power,

which are in line with the Company’s development

strategies, to the Company in accordance with the

relevant PRC regulations, with a view to enhancing the

operating results of the Company and reducing connected

transactions and competition between Yankuang Group

and the Company. Yankuang Group should allow the

Company to participate and invest in, for the purpose of

co-development of the coal liquefaction project, which is

currently being developed by Yankuang Group.


been performed.

(3) All the related expenses incurred in the implementation

of the share reform plan should be borne by Yankuang

Group.


been performed.



IX. EXPANSION OF BUSINESS SCOPE

As approved at the 2009 annual general meeting of the Company held on 25 June 2010, the business scope of the

Company was extended to include: sale of coking coal and iron ore; import and export of commodity and techniques;

warehousing and vehicles repairs and the business scope in the Articles has been correspondingly amended.

X. INCREASING REGISTERED CAPITAL OF YANCOAL AUSTRALIA PTY LTD

As approved at the seventeenth meeting of the fourth session of the Board held on 30 December 2010, the Company

increased the capital investment in Yancoal Australia Pty Ltd by AUD909 million (approximately RMB5.9 billion) with

its own capital. Upon the completion of the capital increase, the capital investment in Yancoal Australia were increased

from AUD64 million to AUD973 million.

The capital increase has been approved by the Foreign Investment Review Board of Australia and the National

Development and Reform Commission of the PRC on and at present, the procedures for remitting the capital increase

are in progress.

XI. INCREASING THE REGISTERED CAPITAL OF ORDOS NENG HUA

At the eighteenth meeting of the fourth session of the Board held on 17 January 2011, it was approved that the Company

increased its capital investment in Ordos Neng Hua, a wholly-owned subsidiary, by RMB 2.6 billion with its own funds.

On 24 January 2011, the registered capital of Ordos Neng Hua increased from RMB 500 million to RMB 3.1 billion.

XII. During the reporting period, the Company and its Directors, Supervisors, senior management, Shareholders, actual

controlling persons have not taken compulsory measures, or been transferred to judicial bodies or be held criminally

liable by the relevant authorities and judicial departments nor have any of them been inspected or punished by the

CSRC, banned from entering the securities markets, confirmed as not fit or proper persons and be publicly reprimanded

by other administrative departments, and the stock exchanges.

XIII. There were no events related to bankruptcy or restructuring of the Company during the reporting period.

Chapter 11 Independent Auditor’s Report


TO THE SHAREHOLDERS OF YANZHOU COAL MINING COMPANY LIMITED

兗州煤業股份有限公司(A joint stock company with limited liability established in the People's Republic of China)

We have audited the consolidated financial statements of Yanzhou Coal Mining Company Limited (the “Company”) and its

subsidiaries (collectively referred to as the “Group”) set out on pages 102 to 205, which comprise the consolidated balance

sheet as at December 31, 2010, and the consolidated income statement, the consolidated statement of comprehensive income,

the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a

summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and

fair view in accordance with International Financial Reporting Standards issued by the International Accounting Standards

Board and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors

determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,

whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report

our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability

to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on

Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with

ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks

of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements

that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Chapter 11Independent Auditor’s Report


OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at

December 31, 2010 and of the Group’s profit and cash flows for the year then ended in accordance with International

Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong

Kong Companies Ordinance.

Grant Thornton Jingdu Tianhua

Certified Public Accountants

20th Floor, Sunning Plaza

10 Hysan Avenue

Causeway Bay

Hong Kong

March 25, 2011

Chapter 12 Consolidated Financial Statements


CONSOLIDATED INCOME STATEMENTFor the year ended December 31, 2010

Year ended December 31, NOTES 2010 2009 2008 RMB’000 RMB’000 RMB’000

GROSS SALES OF COAL 7 32,590,911 19,947,748 24,933,349RAILWAY TRANSPORTATION SERVICE INCOME 513,282 267,345 255,713GROSS SALES OF ELECTRICITY POWER 185,542 187,540 59,811GROSS SALES OF METHANOL 629,290 258,867 38,550GROSS SALES OF HEAT SUPPLY 25,227 15,638 –

TOTAL REVENUE 33,944,252 20,677,138 25,287,423

TRANSPORTATION COSTS OF COAL 7 (1,160,470) (403,311) (508,712)COST OF SALES AND SERVICE PROVIDED 8 (16,801,323) (10,589,991) (12,201,131)COST OF ELECTRICITY POWER (195,536) (190,802) (88,253)COST OF METHANOL (716,802) (352,943) (37,834)COST OF HEAT SUPPLY (12,490) (9,734) –

GROSS PROFIT 15,057,631 9,130,357 12,451,493

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9 (5,093,904) (3,820,241) (3,832,031)SHARE OF INCOME (LOSS) OF ASSOCIATES 28 8,870 109,786 (67,367)OTHER INCOME 10 3,108,081 311,019 351,493INTEREST EXPENSE 11 (603,343) (45,115) (38,360)

PROFIT BEFORE INCOME TAXES 12,477,335 5,685,806 8,865,228INCOME TAXES 12 (3,171,043) (1,553,312) (2,385,617)

PROFIT FOR THE YEAR 13 9,306,292 4,132,494 6,479,611

Attributable to:Equity holders of the Company 9,281,386 4,117,322 6,488,908Non-Controlling interests 24,906 15,172 (9,297)

9,306,292 4,132,494 6,479,611

EARNINGS PER SHARE, BASIC 16 RMB 1.89 RMB 0.84 RMB 1.32

EARNINGS PER ADS, BASIC 16 RMB 18.87 RMB 8.37 RMB 13.19

Chapter 12Consolidated Financial Statements


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended December 31, 2010

Year ended December 31, 2010 2009 2008 RMB’000 RMB’000 RMB’000

Profit for the year 9,306,292 4,132,494 6,479,611

Other comprehensive income (after income tax):

Available-for-sales investments:Change in fair value (87,270) 125,225 (269,639)Deferred taxes 21,818 (31,306) 67,409

(65,452) 93,919 (202,230)Cash flow hedges:Cash flow hedge reserve recognized 54,532 12,280 (20,567)Reclassification adjustments for amounts transferred to income statement (included in selling, general and administrative expenses) (6,576) 18,118 – Deferred taxes (24,350) (11,780) 8,831

23,606 18,618 (11,736)

Share of other comprehensive income of associates 1,107 – –Exchange difference arising on translation of foreign operations 173,415 134,184 (101,227)

Other comprehensive income (loss) for the year 132,676 246,721 (315,193)

Total comprehensive income for the year 9,438,968 4,379,215 6,164,418

Attributable to: Equity holders of the Company 9,414,110 4,364,043 6,173,715 Non-controlling interests 24,858 15,172 (9,297)

9,438,968 4,379,215 6,164,418



CONSOLIDATED BALANCE SHEETas at 31 December 2010

At December 31,

NOTES 2010 2009 RMB’000 RMB’000

ASSETS

CURRENT ASSETSBank balances and cash 17 6,771,314 8,522,399Term deposits 17 2,567,722 3,216,697Restricted cash 17 85,188 315,045Bills and accounts receivable 18 10,017,260 4,723,922Inventories 19 1,646,116 886,360Prepayments and other receivables 20 2,613,686 1,868,229Prepaid lease payments 21 18,280 17,121Prepayment for resources compensation fees 22 3,948 2,761Derivative financial instruments 36 239,476 37,760Tax recoverable 169,013 59,978Overburden in advance 25 149,351 350,676

TOTAL CURRENT ASSETS 24,281,354 20,000,948

NON-CURRENT ASSETS Intangible assets 23 19,633,164 18,866,674Prepaid lease payments 21 728,082 691,339Prepayment for resources compensation fees 22 8,072 13,208Property, plant and equipment 24 19,874,615 18,877,134Goodwill 26 1,196,586 1,305,345Investments in securities 27 224,442 295,295Interests in associates 28 1,074,958 939,981Interests in jointly controlled entities 30 751 1,257Restricted cash 17 1,365,995 238,730Deposits made on investments 29 3,243,679 175,021Deferred tax assets 38 1,124,166 1,027,659

TOTAL NON-CURRENT ASSETS 48,474,510 42,431,643

TOTAL ASSETS 72,755,864 62,432,591



CONSOLIDATED BALANCE SHEET (continued)as at 31 December 2010

At December 31,

NOTES 2010 2009 RMB’000 RMB’000

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIESBills and accounts payable 32 1,554,444 1,366,976Other payables and accrued expenses 33 3,820,971 4,441,834Provision for land subsidence, restoration, rehabilitation and environmental costs 34 2,300,637 1,564,106Amounts due to Parent Company and its subsidiary companies 46 438,783 757,882Borrowings-due within one year 35 614,925 1,598,113Current portion of long term payable-due within one year 37 6,536 5,967Derivative financial instruments 36 166,178 28,333Tax payable 1,231,388 647,190

TOTAL CURRENT LIABILITIES 10,133,862 10,410,401

NON-CURRENT LIABILITIESBorrowings-due after one year 35 22,400,833 20,911,728Deferred tax liability 38 2,601,207 1,785,087Provision for land subsidence, restoration, rehabilitation and environmental costs 34 152,594 44,702Non-current portion of long term payable-due after one year 37 28,917 26,380

TOTAL NONCURRENT LIABILITIES 25,183,551 22,767,897

TOTAL LIABILITIES 35,317,413 33,178,298

Capital and reserves 39Share capital 4,918,400 4,918,400Reserves 32,413,486 24,233,407

Equity attributable to equity holders of the Company 37,331,886 29,151,807Non-controlling interests 106,565 102,486

TOTAL EQUITY 37,438,451 29,254,293

TOTAL LIABILITIES AND EQUITY 72,755,864 62,432,591

The consolidated financial statements on pages 102 to 205 were approved and authorized for issue by the Board of Directors

on March 25, 2011 and are signed on its behalf by:

Wu Yuxiang Li Weimin

Director Director



CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended December 31, 2010

Statutory Attributable to Future common Investment Cash flow equity holders Non- Share Share development reserve Translation revaluation hedge Retained of the controlling capital premium fund fund reserve reserve reserve earnings Company interest Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 39) (note 39) (note 39)

Balance at January 1, 2008 4,918,400 2,981,002 2,587,105 2,037,940 (13,942) 260,179 – 8,646,853 21,417,537 71,075 21,488,612

Profit for the year – – – – – – – 6,488,908 6,488,908 (9,297) 6,479,611Other comprehensive income: -Fair value change of available -for-sale investments – – – – – (202,230) – – (202,230) – (202,230) -Cash flow hedge reserve recognized – – – – – – (11,736) – (11,736) – (11,736) -Exchange difference arising on translation of foreign operations – – – – (101,227) – – – (101,227) – (101,227)

Total comprehensive income for the year – – – – (101,227) (202,230) (11,736) 6,488,908 6,173,715 (9,297) 6,164,418

Transactions with owners -Dividends – – – – – – – (836,128) (836,128) (292) (836,420) -Appropriations to reserves – – 382,219 785,235 – – – (1,167,454) – – –

Total transactions with owners – – 382,219 785,235 – – – (2,003,582) (836,128) (292) (836,420)

Balance at December 31, 2008 4,918,400 2,981,002 2,969,324 2,823,175 (115,169) 57,949 (11,736) 13,132,179 26,755,124 61,486 26,816,610

Balance at January 1, 2009 4,918,400 2,981,002 2,969,324 2,823,175 (115,169) 57,949 (11,736) 13,132,179 26,755,124 61,486 26,816,610

Profit for the year – – – – – – – 4,117,322 4,117,322 15,172 4,132,494Other comprehensive income: -Fair value change of available -for-sale investments – – – – – 93,919 – – 93,919 – 93,919 -Cash flow hedge reserve recognized – – – – – – 18,618 – 18,618 – 18,618 -Exchange difference arising on translation of foreign operations – – – – 134,184 – – – 134,184 – 134,184

Total comprehensive income for the year – – – – 134,184 93,919 18,618 4,117,322 4,364,043 15,172 4,379,215

Transactions with owners -Appropriations to reserves – – 292,550 381,280 – – – (673,830) – – – -Dividends – – – – – – – (1,967,360) (1,967,360) (466) (1,967,826) -Acquisition of non-controlling interests – – – – – – – – – (134,820) (134,820) -Acquisition of subsidiaries – – – – – – – – – 161,114 161,114

Total transactions with owners – – 292,550 381,280 – – – (2,641,190) (1,967,360) 25,828 (1,941,532)

Balance at December 31, 2009 4,918,400 2,981,002 3,261,874 3,204,455 19,015 151,868 6,882 14,608,311 29,151,807 102,486 29,254,293




Statutory Attributable to Future common Investment Cash flow equity holders Non- Share Share development reserve Translation revaluation hedge Retained of the controlling capital premium fund fund reserve reserve reserve earnings Company interest Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 39) (note 39) (note 39)

Balance at January 1, 2010 4,918,400 2,981,002 3,261,874 3,204,455 19,015 151,868 6,882 14,608,311 29,151,807 102,486 29,254,293 Profit for the year – – – – – – – 9,281,386 9,281,386 24,906 9,306,292Other comprehensive income: -Fair value change of available -for-sale investments – – – – – (65,452) – – (65,452) – (65,452) -Cash flow hedge reserve recognized – – – – – – 23,606 – 23,606 – 23,606 -Exchange difference arising on translation of foreign operations – – – – 173,463 – – – 173,463 (48) 173,415 -Share of other comprehensive income of associates – – – – – 1,107 – – 1,107 – 1,107

Total comprehensive income for the year – – – – 173,463 (64,345) 23,606 9,281,386 9,414,110 24,858 9,438,968

Transactions with owners -Disposal of a joint venture and subsidiaries – – – – – – – – – (23,325) (23,325) -Appropriations to reserves – – 398,750 665,965 – – – (1,064,715) – – – -Dividends – – – – – – – (1,229,600) (1,229,600) (1,871) (1,231,471) -Acquisition of non-controlling interests – – – – – – – (4,431) (4,431) 4,417 (14)

Total transactions with owners – – 398,750 665,965 – – – (2,298,746) (1,234,031) (20,779) (1,254,810)

Balance at December 31, 2010 4,918,400 2,981,002 3,660,624 3,870,420 192,478 87,523 30,488 21,590,951 37,331,886 106,565 37,438,451



CONSOLIDATED CASH FLOW STATEMENTFor the year ended December 31, 2010

Year ended December 31, 2010 2009 2008 NOTES RMB’000 RMB’000 RMB’000

OPERATING ACTIVITIES

Profit before income taxes 12,477,335 5,685,806 8,865,228Adjustments for:Interest expenses 603,343 45,115 38,360Interest income (187,189) (187,604) (275,220)Dividend income (4,504) (2,288) (7,401)Net unrealized foreign exchange losses (2,180,277) 37,676 284,278Depreciation of property, plant and equipment 2,426,626 1,793,278 1,140,809Release of prepaid lease payments 17,958 17,027 15,109Amortization of prepayment for resources compensation fees 3,949 2,761 2,998Amortization of intangible assets 349,655 44,278 35,652Reversal of impairment loss on accounts receivable and other receivables (4,923) (13,634) (4,369)Provision for inventory 4,411 – –Impairment loss on property, plant and equipment 97,559 – –Share of (income) loss of associates (8,870) (109,786) 67,367Gain on disposal of a joint venture and subsidiaries (117,928) – –Loss (Gain) on disposal of property, plant and equipment 16,937 11,252 (12,317)Written off of property, plant and equipment 1,491 14,199 –

Operating cash flows before movements in working capital 13,495,573 7,338,080 10,150,494

Increase in bills and accounts receivable (5,286,147) (1,416,577) (217,012)(Increase) decrease in inventories (728,026) 228,862 (405,200)Movement in land subsidence, restoration, rehabilitation and environmental cost 838,510 1,109,659 431,344Movement in overburden cost 224,546 – –(Increase) decrease in prepayments and other current assets (694,726) 20,193 (1,242,027)Increase (decrease) in bills and accounts payable 158,859 (4,964) 263,755Increase in other payables and accrued expenses 153,893 622,093 34,481Increase in long-term payables 5,654 3,980 –(Decrease) increase in amounts due to Parent Company and its subsidiary companies (319,099) 57,549 40,749

Cash generated from operations 7,849,037 7,958,875 9,056,584

Income taxes paid (2,038,697) (1,596,774) (2,207,217)Interest paid (602,743) (28,501) (36,511)Interest income received 187,561 184,243 275,220Dividend income received 4,646 2,288 7,401

NET CASH FROM OPERATING ACTIVITIES 5,399,804 6,520,131 7,095,477



CONSOLIDATED CASH FLOW STATEMENT (continued)For the year ended December 31, 2010

Year ended December 31, NOTES 2010 2009 2008 RMB’000 RMB’000 RMB’000

INVESTING ACTIVITIES

Decrease (increase) in term deposits 648,975 (1,971,371) 141,599Purchase of property, plant and equipment (3,576,136) (2,133,726) (2,027,030)Decrease in other loans receivable – – 640,000Increase in restricted cash (874,643) (432,492) (50,412)Increase in deposit made on investment (3,125,753) (57,095) –Proceeds on disposal of property, plant and equipment 205,446 79,626 19,829Acquisition of non-controlling interests of Shanxi Tianhao (14) – –Acquisition of three subsidiaries 44 (133,000) – –Acquisition of Hua Ju Energy 42 – (761,683) –Acquisition of Felix 43 – (19,558,544) –Acquisition of mining rights in Zhaolou – – (747,339)Proceeds on disposal of a joint venture and subsidiaries 45 1,147,821 – –Investments in securities (16,257) – –Investments in associates (125,000) – –Purchase of intangible assets (35,352) (233) –Purchase of land use right (442) (7,420) (68,136)

NET CASH USED IN INVESTING ACTIVITIES (5,884,355) (24,842,938) (2,091,489)

FINANCING ACTIVITIES Dividend paid (1,229,600) (1,967,360) (836,128)Proceeds from bank borrowings 1,110,954 20,840,505 –Repayments of bank borrowings (655,528) (188,705) (72,000)Repayments of other borrowings (584,478) – –Repayment to Parent Company and its subsidiary companies in respect of consideration for acquisition of Jining III – (13,248) (13,248)Dividend paid to non-controlling interests of a subsidiary (1,871) (201) (292)Dividend paid to the former shareholders of Hua Ju Energy – (47,250) –Repayment of borrowings to Parent Company – (120,000) –

NET CASH (USED IN) FROM FINANCING ACTIVITIES (1,360,523) 18,503,741 (921,668)

NET DECREASE INCREASE IN CASH AND CASH EQUIVALENTS (1,845,074) 180,934 4,082,320

CASH AND CASH EQUIVALENTS, AT JANUARY 1 8,522,399 8,439,578 4,424,561EFFECT OF FOREIGN EXCHANGE RATE CHANGES 93,989 (98,113) (67,303)

CASH AND CASH EQUIVALENTS, AT DECEMBER 31, REPRESENTED BY BANK BALANCES AND CASH 6,771,314 8,522,399 8,439,578



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended December 31, 2010

1. GENERAL

Organization and principal activities

Yanzhou Coal Mining Company Limited (the “Company”) is established as a joint stock company with limited liability

in the People’s Republic of China (the “PRC”). In April 2001, the status of the Company was changed to that of a sino-

foreign joint stock limited company. The Company’s A shares are listed on the Shanghai Securities Exchange (“SSE”),

its H shares are listed on The Stock Exchange of Hong Kong (the “SEHK”), and its American Depositary Shares (“ADS”,

one ADS represents 10 H shares) are listed on the New York Stock Exchange, Inc. The addresses of the registered office

and principal place of business of the Company are disclosed in the Group Profile and General Information to the

annual report.

The Company operates six coal mines, namely the Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine,

Dongtan coal mine, Jining II coal mine (“Jining II”) and Jining III coal mine (“Jining III”), as well as a regional rail

network that links these mines with the national rail network. The Company’s parent and ultimate holding company is

Yankuang Group Corporation Limited (the “Parent Company”), a state-owned enterprise in the PRC.

The principal activities of the Company’s subsidiaries, associate and joint ventures are set out in notes 54, 28, 30 and 31

respectively.

As at December 31, 2010, the Group has a net current assets of RMB14,147,492,000 (2009: RMB9,590,547,000) and total

assets less current liabilities of RMB62,622,002,000 (2009: RMB52,022,190,000).

Acquisitions and establishment of major subsidiaries

In 2006, the Company acquired a 98% equity interest in Yankuang Shanxi Neng Hua Company Limited (“Shanxi Neng

Hua”) and its subsidiaries (collectively referred as the “Shanxi Group”) from the Parent Company at cash consideration

of RMB733,346,000. The principal activities of Shanxi Group are to invest in heat and electricity, manufacture and sale

of mining machinery and engine products, coal mining and the development of integrated coal technology.

Shanxi Neng Hua is an investment holding company, which holds 81.31% equity interest in Shanxi Heshun Tianchi

Energy Company Limited (“Shanxi Tianchi”) and approximately 99.85% equity interest in Shanxi Tianhao Chemical

Company Limited (“Shanxi Tianhao”). In the current year, Shanxi Neng Hua acquired approximate 0.04% equity

interest of Shanxi Tianhao at cash consideration of RMB14,000. The principal activities of Shanxi Tianchi are to

exploit and sale of coal from Tianchi Coal Mine, the principal asset of Shanxi Tianchi. Shanxi Tianchi has completed

the construction of Tianchi Coal Mine and commenced production by the end of 2006. Shanxi Tianhao is established

to engage in the production of methanol and other chemical products, coke production, exploration and sales. The

construction of the methanol facilities by Shanxi Tianhao commenced in March 2006 and it has commenced production

in 2008. In 2007, the Company further acquired the remaining 2% equity interest in Shanxi Neng Hua from a subsidiary

of the Parent Company at cash consideration of RMB14,965,000.



1. GENERAL (continued)

In 2004, the Company acquired a 95.67% equity interest in Yanmei Heze Company Limited (“Heze”) from the

Parent Company at cash consideration of RMB584,008,000. The principal activities of Heze are to conduct the initial

preparation of the coal mines at the Juye coalfield which includes obtaining the approvals for the coal mine projects,

applying rights to explore for coal and preparing the construction work of the coal mines. The equity interests held by

the Company increased to 96.67% after the increase of the registered capital of Heze in 2007. The equity interests held by

the Company increased to 98.33% after the increase of the registered capital of RMB1.5 billion in the current year.

The Company originally held a 97% equity interest in Yanzhou Coal Yulin Power Chemical Co., Ltd. (“Yulin”). In 2008,

the Company acquired the remaining 3% equity interest in Yulin. Moreover, the Company made further investment of

RMB600,000,000 in Yulin in 2008.

In February 2009, the Company acquired 74% equity interest in Shandong Hua Ju Energy Company Limited (“Hua

Ju Energy”) from the Parent Company at a consideration of RMB593,243,000. Hua Ju Energy is a joint stock limited

company established in the PRC with the principal business of the supply of electricity and heat by utilizing coal gangue

and coal slurry produced from coal mining process. In July 2009, the Company entered into acquisition agreements with

three shareholders of Hua Ju Energy, pursuant to which, the Company agreed to acquire 21.14% equity interest in Hua

Ju Energy at a consideration of RMB173,007,000.

In 2009, the Company entered into a binding scheme implementation agreement with Felix Resources Limited (“Felix”),

a corporation incorporated in Australia with shares listed on the Australian Securities Exchange, to acquire all the shares

of Felix in cash of approximately AUD3,333 million. The principal activities of Felix are exploring and extracting coal

resources, operating, identifying, acquiring and developing resource related projects that primarily focus on coal in

Australia. This acquisition was completed in 2009.

In 2009, the Company invested RMB500 million to set up a wholly owned subsidiary located in Inner Mongolia,

Yanzhou Coal Ordos Neng Hua Company Limited (“Ordos”). Ordos is a limited liability company incorporated in the

PRC with the objectives of production and sale of methanol and other chemical products. As at December 31, 2010,

Ordos has not yet commenced any construction and production projects.

During the year, the Company acquired 100% equity interest of Inner Mongolia Yize Mining Investment Co., Ltd

(“Yize”) and other two companies with consideration of RMB190,095,000. The main purpose of this acquisition is

to facilitate the business of methanol and other chemical products in Inner Mongolia Autonomous Region. As at 31

December, 2010, the three newly acquired companies have not commenced any construction and production projects.



2. BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with International Financial

Reporting Standards (“IFRS”). The Company also prepares a set of consolidated financial statements in accordance with

the relevant accounting principles and regulations applicable to PRC enterprises (“PRC GAAP”).

The consolidated financial statements include applicable disclosures required by the Hong Kong Companies Ordinance

and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The consolidated financial statements are presented in Renminbi, which is also the functional currency of the Company.

Changes in accounting estimates

In current year, unit-of-production method is applied for the amortization of coal reserves located in China. In the

previous years, these assets were amortized on a straight-line basis. The directors of the Company consider unit-of-

production method can better reflect the expected pattern of consumption of economic benefits of such assets. Changes

of accounting estimates have no material impact on the consolidated financial statements.

Comparative figures

Business taxes and surcharges have been reclassified from as a deduction of each categories of revenue to each

corresponding costs of these revenue to provide a more appropriate presentation. Therefore, for the years ended

December 31, 2009 and December 31, 2008, subtotals of income and corresponding costs increased by RMB423,776,000

and RMB384,342,000 respectively. The reclassification has no impact to the overall results of the Group. The

reclassification does not result in any changes to the consolidated balance sheets as at 31 December 2009 and 31

December 2008 and therefore they are not presented in the consolidated financial statements.



3. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

STANDARDS

In the current year, the Group has applied, for the first time, a number of new standards and interpretations, and

amended and revised standards and interpretations (“new IFRSs”) applicable to the Group issued by the International

Accounting Standards Board (the “IASB”) and the International Financial Reporting Interpretations Committee (the

IFRIC) of IASB, which are effective for the Group’s financial year beginning January 1, 2010.

IFRSs (Amendments) Improvements to IFRSs 2009

IAS 27 (Revised) Consolidated and Separate Financial Statements

IFRS 3 (Revised) Business Combinations

IAS 39 (Amendment) Eligible Hedged Items

Except for those new accounting policies effective for the financial year beginning January 1, 2010 as applied in these

financial statements of the Group, the accounting policies adopted for the current year are the same as those adopted

for the Group’s financial statements for the year ended December 31, 2009. The effects of new IFRSs, which have a

significant impact on the financial statements of the Group, are as follow:

• IFRS 3 (Revised)-Business Combinations

The IFRS3 (Revised) introduced major changes to the accounting requirements for business combinations. It

retains the major features of the purchase method of accounting, now referred to as the acquisition method.

The most significant changes in IFRS3 (Revised) that had an impact on the Group’s acquisitions in 2010 are as

follows: The assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

Any contingent consideration is measured at fair value at the acquisition date. If the contingent consideration

arrangement gives rise to a financial liability, any subsequent changes are generally recognized in profit or loss.

Acquisition-related costs of the combination are recorded as an expense in the income statement. Prior to January

1, 2010, the costs were accounted for as part of the cost of the acquisition. As the Group did not have a material

business combination in the current year, the adoption of IFRS 3 (Revised) did not have any material impact on

the current year financial statements. IFRS 3 (Revised) is adopted prospectively.

• IAS 27 (Revised) Consolidated and Separate Financial Statements

IAS 27 (Revised) introduced changes to the accounting requirements for transactions with non-controlling

interests and the loss of control of a subsidiary. IAS 27 (Revised) requires the changes in the Group’s ownership

interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for

as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are

adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount

by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is

recognised directly in equity and attributed to owners of the Company. Prior to January 1, 2010, goodwill arising

on acquisition of additional interest in subsidiary represented the excess of the cost of acquisition over the

carrying value of the net assets attributable to the additional interest in the subsidiary. IAS 27 (Revised) is adopted

prospectively.

The adoption of IAS 27 (Revised) did not have material impact in the current year financial statements.




STANDARDS (continued)

• Improvements to IFRSs 2009

The Improvements to IFRSs 2009 (“2009 Improvements”) made several minor amendments to IFRSs. The only

amendment relevant to the Group relates to IAS 17 Leases. Prior to this amendment, IAS 17 generally required

a lease of land to be classified as an operating lease. The amendment requires that leases of land are classified as

finance or operating applying the general principles of IAS 17. The Group has reassessed the classification of the

land elements of its unexpired leases and has determined that none of its leases require reclassification.

The adoption of the new IFRSs had no material effect on how the financial statements for the current or prior

accounting years have been prepared. Accordingly, no prior year adjustment has been required.

The Group has not early applied the following new and revised standards, amendments or interpretations that have been

issued but are not yet effective.

IFRSs (Amendments) Improvement to IFRSs 20101

IFRS 7 (Amendments) Disclosures – Transfers of Financial Assets2

IFRS 9 Financial Instruments3

IAS 24 (Revised) Related Parties Disclosures4

1 Effective for annual periods beginning on or after July 1, 2010 and January 1, 2011, as appropriate

2 Effective for annual periods beginning on or after July 1, 2011

3 Effective for annual periods beginning on or after January 1, 2013

4 Effective for annual periods beginning on or after January 1, 2011

• IFRS 9 Financial instruments

Under IFRS 9, all recognised financial assets that are within the scope of IAS 39 Financial Instruments:

Recognition and Measurement are subsequently measured at either amortised cost or fair value. Specifically, debt

investments that are held within a business model whose objective is to collect the contractual cash flows, and that

have contractual cash flows that are solely payments of principal and interest on the principal outstanding are

generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and

equity investments are measured at their fair values at the end of subsequent accounting periods




STANDARDS (continued)

• IFRS 9 Financial instruments (continued)

In relation to financial liabilities, the significant change relates to financial liabilities that are designated as at

fair value through profit or loss. Specifically, under IFRS 9, for financial liabilities that are designated as at fair

value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to

changes in the credit risk of that liability is presented in other comprehensive income, unless the presentation

of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an

accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not

subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair

value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

• IAS 24 Related Party Disclosures (Revised)

The revised standard is applicable for annual periods beginning on or after January 1, 2011. The revised standard

clarifies and simplifies the definition of a related party and it introduces certain exemptions on disclosure

requirements in respect of transactions between government-related entities and government, and other

government-related entities.

Except for the abovementioned standards or interpretations, the directors are evaluating the impact of application

of other standards or interpretations on the Group’s future results and financial statements.



4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis except for certain financial

instruments, which are stated at fair value. The principal accounting policies are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled

by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and

operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated

income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Total

comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests

even if its results in the non-controlling interests having a deficit balance.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into

line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the

subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-

controlling interests are adjusted to reflect the changes in relative interests in the subsidiaries. Any difference between

the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is

recognized directly in equity and attributed to owners of the Company.

Business combination

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each

acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or

assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs

are recognised in profit or loss as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured

initially at their fair values at the acquisition date. Subsequent adjustments to the consideration are recognized against

the cost of acquisition within the measurement period which does not exceed one year from the acquisition date.

Subsequent accounting for changes in fair values of the contingent consideration that do not qualify as measurement

period adjustments is included in the income statement or within equity for contingent consideration classified as an

asset/liability and equity respectively.



4. SIGNIFICANT ACCOUNTING POLICIES (continued)

Business combination (continued)

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling

interests in the acquiree, and the fair value of the acquirer’s previously held equity in the acquiree (if any) over the

net of the acquisition–date amounts of the identifiable assets acquired and liabilities assumed. If, after assessment,

the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of

the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value on the

acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as

bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the

entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling

interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of

measurement basis is made on a transaction-by-transaction basis. The Group applies the non-controlling interests’

proportionate share of the recognized amounts of the acquiree’s identifiable net assets to account for all its acquisitions.

Interests in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest

in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the

investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using

the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated

balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of net assets of the associates, less

any identified impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that

associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the

associate), the Group discontinues recognizing its share of further losses. An additional share of losses is provided for

and a liability is recognized only to the extent that the Group has incurred legal or constructive obligations or made

payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and

contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is

included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any

excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost

of acquisition, after reassessment, is recognized immediately in profit or loss.




Interests in associates (continued)

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with

respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment

(including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by

comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount,

Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment

loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently

increases.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the

Group’s interest in the relevant associate.

Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that

is subject to joint control (i.e. when the strategic financial and operating policy decisions relating to the activities of the

joint venture require the unanimous consent of the parties sharing control).

When a group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly

controlled assets and any liabilities incurred jointly with other venturers are recognized in the financial statements of the

relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests

in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of

the output of jointly controlled assets, and its share of joint venture expenses, are recognized when it is probable that

the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured

reliably.

Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest

are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity

method of accounting and the details of equity method of accounting have been set out in the accounting policy for

interests in associates. When a group entity transacts with a jointly controlled entity of the Group, unrealized profits and

losses are eliminated to the extent of the Group’s interest in the joint venture.

The Group’s share using proportionate consolidation of the assets, liabilities, revenue and expenses of other joint

ventures (no separate entity has been established) are included in the appropriate items of the financial statements.




Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for

goods sold and services provided in the normal courses of business, net of discounts and sales related taxes. Provided it

is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured

reliably, revenue is recognized in profit or loss as follows:

Sales of goods are recognised upon transfer of the significant risks and rewards of ownership to the customer. This is

usually taken as the time when the goods are delivered and the customer has accepted the goods.

Service income is recognized when services are provided.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the

effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the

expected life of the financial assets to that asset’s net carrying amount.

Dividend income from investments is recognized when the shareholders’ rights to receive payments have been

established.




Intangible assets (other than goodwill)

Intangible assets acquired separately

Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated impairment

losses. Amortization is recognized over their estimated useful lives. The estimated useful life and amortisation method

are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for

on a prospective basis.

Internally-generated intangible assets – research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development expenditure is recognized only if it is anticipated that

the development costs incurred on a clearly-defined project will be recovered through future commercial activity. The

resultant asset is amortized on a straight line basis over its useful life. Expenditure incurred on projects to develop new

products is capitalized only when the Group can demonstrate the technical feasibility of completing the intangible asset

so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will

generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably

the expenditure during the development.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at

their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less

accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired

separately.

(i) Coal reserves

Coal reserves represent the portion of total proven and probable reserves in the coal mine of a mining right. Coal

reserves are amortized over the life of the mine on a unit of production basis of the estimated total proven and

probable reserves or the Australia Joint Ore Reserves Committee (“JORC”) reserves for the Group’s subsidiaries

in Australia. Changes in the annual amortization rate resulting from changes in the remaining reserves are applied

on a prospective basis from the commencement of the next financial year.




Intangible assets (other than goodwill) (continued)

(ii) Coal resources

Coal resources represent the fair value of economically recoverable reserves (excluding the portion of total proven

and probable reserves of coal mines of a mining right i.e. does not include the above coal reserves) of coal mines

of a mining right (Details are set out in the accounting policy of exploration and evaluation expenditure). When

production commences, the coal resources for the relevant areas of interest are amortized over the life of the area

according to the rate of depletion of the economically recoverable reserves.

(iii) Rail access rights

Rail access rights are amortized on a straight line basis or on a unit of production basis under agreement over the

life of the mine.

Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each separately identifiable area of interest

which is at individual mine level. These costs are only carried forward where the right of tenure for the area of interest

is current and to the extent that they are expected to be recouped through successful development and commercial

exploitation, or alternatively, sale of the area, or where activities in the area have not yet reached a stage which permits

reasonable assessment of the existence of economically recoverable reserves and active and significant operations in, or

in relation to, the area of interest are continuing.

The carrying amount of exploration and evaluation assets is assessed for impairment when facts or circumstances

suggest the carrying amount of the assets may exceed their recoverable amount.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward

costs in relation to that area of interest. Accumulated costs in relation to an abandoned area are written-off in full in the

period in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortized over the life of the

area according to the rate of depletion of the economically recoverable reserves.

Capitalized exploration and evaluation expenditure considered to be tangible is recorded as a component of property,

plant and equipment. Otherwise, it is recorded as an intangible asset.

Exploration and evaluation expenditure acquired in a business combination are recognized at their fair value at the

acquisition date (the fair value of potential economically recoverable reserves at the acquisition date which is shown as

“coal resources”)




Prepaid lease payments

Prepaid lease payments represent land use rights under operating lease arrangement and are stated at cost less

accumulated amortization and accumulated impairment losses.

Property, plant and equipment

Property, plant and equipment, other than construction in progress and freehold land, are stated at cost less subsequent

accumulated depreciation and accumulated impairment losses.

Depreciation is charged so as to write off the cost of items of property, plant and equipment, other than construction in

progress and freehold land, over their estimated useful lives and after taking into account their estimated residual value,

using the straight line method or unit of production method.

Construction in progress represents property, plant and equipment under construction for production or for its own

use purposes. Construction in progress is carried at cost less any impairment loss. Construction in progress is classified

to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation

commences when the assets are ready for their intended use.

Any gain or loss arising on the disposal of an item of property, plant and equipment is determined as the difference

between the sales proceeds and the carrying amount of the asset and is recognized in the consolidated income statement.

Impairment other than goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible assets and intangible assets with

finite useful life to determine whether there is any indication that those assets have suffered an impairment loss. If any

such indication exists, the recoverable amount of the asset (determined at the higher of its fair value less costs to sell and

its value in use) is estimated in order to determine the extent of the impairment loss (if any). Intangible assets with an

indefinite useful life will be tested for impairment annually.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated

future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market

assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the

carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment loss is recognized

as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to

the revised estimate of its recoverable amount, but such that the increased carrying amount does not exceed the carrying

amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit)

in prior years. A reversal of an impairment loss is recognized as an income immediately.




Goodwill

Goodwill arising on acquisitions prior to January 1, 2005

Goodwill arising on an acquisition of net assets and operations of another entity for which the agreement date is

before January 1, 2005 represents the excess of the cost of acquisition over the Group’s interest in the fair value of the

identifiable assets and liabilities of the relevant acquiree at the date of acquisition.

For previously capitalized goodwill arising on acquisitions of net assets and operations of another entity after January

1, 2001, the Group has discontinued amortization from January 1, 2005 onwards, and such goodwill is tested for

impairment annually, and whenever there is an indication that the cash-generating unit to which the goodwill relates

may be impaired (see the accounting policy below).

Goodwill arising on acquisitions on or after January 1, 2005

Goodwill arising on an acquisition of a business for which the agreement date is on or after January 1, 2005 represents

the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities

and contingent liabilities of the relevant business at the date of acquisition. Such goodwill is carried at cost less any

accumulated impairment losses.

Goodwill is presented separately in the consolidated balance sheet.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to

benefit from the synergies of the acquisition. Cash-generating units to which goodwill has been allocated are tested for

impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable

amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to

reduce the carrying amount of any goodwill allocated to the unit first and then to the other assets of the unit pro-rata on

the basis of the carrying amount of each asset in the unit. Any impairment is recognized immediately in the consolidated

income statement and is not subsequently reversed.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of

the gain or loss on disposal.




Inventories

Inventories of coal and methanol are stated at the lower of cost and net realizable value. Cost, which comprises direct

materials and, where applicable, direct labour and overheads that have been incurred in bringing the inventories to their

present location and condition, is calculated using the weighted average method. Net realizable value represents the

estimated selling price less all further costs to completion and costs to be incurred in selling, marketing and distribution.

Inventories of auxiliary materials, spare parts and small tools expected to be used in production are stated at weighted

average cost less allowance, if necessary, for obsolescence.

Overburden in advance

Overburden in advance comprises the accumulation of expenses incurred to enable access to the coal seams, and

includes direct removal costs, machinery and plant running costs. The deferred costs are then charged to the

consolidated income statement in subsequent periods on the basis of run-of-mine (“ROM”) coal tonnes mined. This is

calculated by multiplying the ROM coal tonnes mined during the period by the weighted average cost to remove a bank

cubic metre (“BCM”) of waste by the stripping ratio (ratio of waste removed in BCMs to ROM coal tonnes mined). The

stripping ratio of the Company’s Australian subsidiaries is based on the JORC reserves of each mine.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the

consolidated income statement because it excludes items of income or expense that are taxable or deductible in other

years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated

using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the consolidated

financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted

for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary

differences, and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available

against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the

temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other

assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, associates

and joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable

that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no

longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.




Taxation (continued)

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset

realised. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items that

are recognized in other comprehensive income or directly in equity, in which case the deferred tax is also recognized in

other comprehensive income or directly in equity respectively.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and

the Group intends to settle its current tax assets and liabilities on a net basis.

Felix and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax

consolidation regime. Each entity in the tax consolidated group recognizes its own deferred tax assets and liabilities,

except where the deferred tax assets relate to unused tax losses and credits, in which case Felix recognizes the assets.

Felix group has entered into a tax sharing agreement whereby each company in the Felix group contributes to the

income tax payable in proportion to their contribution to the profit before tax of the tax consolidated group. The tax

consolidated group has also entered into a tax funding agreement whereby each entity in the Felix group can recognize

their balance of the current tax assets and liabilities through inter-entity accounts.

Land subsidence, restoration, rehabilitation and environmental costs

One consequence of coal mining is land subsidence caused by the resettlement of the land above the underground

mining sites. Depending on the circumstances, the Group may relocate inhabitants from the land above the

underground mining sites prior to mining those sites or the Group may compensate the inhabitants for losses or

damages from land subsidence after the underground sites have been mined. The Group may also be required to make

payments for restoration, rehabilitation or environmental protection of the land after the underground sites have been

mined.

An estimate of such costs is recognized in the period in which the obligation is identified and is charged as an expense

in proportion to the coal extracted. At each balance sheet date, the Group adjusts the estimated costs in accordance

with the actual land subsidence status. The provision is also adjusted for changes in estimates. Those adjustments are

accounted for as a change in the corresponding capitalised cost, except where a reduction in the provision is greater than

the undepreciated capitalised cost of any related assets, in which case the capitalised cost is reduced to nil and remaining

adjustment is recognised in the income statement. Changes to the capitalised cost result in an adjustment to future

depreciation and financial charges.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of

ownership to the lessee. All other leases are classified as operating leases.

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased

asset, or, if lower, the present values of the minimum lease payments of such assets are included in property, plant and

equipment and the corresponding liabilities, net of finance charges, are recorded as an obligation under finance leases.




Leasing (continued)

Each lease payment is allocated between liability and finance charges so as to achieve a constant rate of interest on the

remaining balance of the liability. The finance lease liabilities are included in current and non-current borrowings.

The finance charges are expensed in the income statement over the lease periods so as to produce a constant periodic

rate of interest on the remaining balance of the liability for each period. The assets accounted for as finance leases are

depreciated over the shorter of their estimated useful lives or the lease periods.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Contingent rentals

arising under operating leases are recognized as an expense in the period in which they are incurred.

Provisions and contingent liabilities

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and

it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the

amount of the obligation can be made. Where the time value of money is material, provisions are stated at the present

value of the expenditure expected to settle the obligation.

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated

reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is

remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or

more future uncertain events not wholly within the control of the Group are also disclosed as contingent liabilities

unless the probability of outflow of economic benefits is remote.




Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets

that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalized as part of

the cost of those assets. Investment income earned on the temporary investment of specific borrowings pending their

expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowings costs are recognized as expenses in the period in which they are incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the

functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e., the

currency of the primary environment in which the entity operates) at the rates of exchanges prevailing on the dates of

the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the

rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign

currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items

that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are

recognized in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign

operations are translated into the presentation currency of the Company (i.e. Renminbi) at the rate of exchange

prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the

year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the

dates of transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and

accumulated in equity (attributed to non-controlling interests as appropriate). Such exchange differences are recognized

in profit or loss in the period in which the foreign operation is disposed of.




Government grants

Government grants are recognized as income over the periods necessary to match them with the related costs. If the

grants do not relate to any specific expenditure incurred by the Group, they are reported separately as other income.

If the grants subsidize an expense incurred by the Group, they are deducted in reporting the related expense. Grants

relating to depreciable assets are presented as a deduction from the cost of the relevant asset.

Annual leave, sick leave and long service leave

Benefits accruing to employees in respect of wages and salaries, annual leave and sick leave are included in trade and

other payables. Related on-costs are also included in trade and other payables as other creditors. Long service leave is

provided for when it is probable that settlement will be required and it is capable of being measured reliably.

Employee benefits expected to be settled within 12 months are measured using the remuneration rate expected to apply

at the time of settlement. Provisions made in respect of employee benefits which are not expected to be settled within 12

months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of

services provided by employees up to the reporting date.

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as expenses when the employees render the

services entitling them to the contributions.

Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions

of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are

directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and

financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets

or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of

financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into loans and receivables and available-for-sale financial assets. All regular

way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases

or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by

regulation or convention in the marketplace. The accounting policies adopted in respect of financial assets are set out

below.




Financial instruments (continued)

Loan and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an

active market. Loan and receivables (including bank balances and cash, term deposits, restricted cash, bills and accounts

receivable and other receivables) are initially measured at fair value and subsequently measured at amortized cost using

the effective interest method, less any identified impairment loss.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair

value through profit or loss, loans and receivables or held-to-maturity investments.

At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair

value. Changes in fair value are recognized initially in other comprehensive income and accumulated in equity, until

the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously

recognized in equity is removed from equity and recognized in profit or loss (see accounting policy on impairment loss

on financial assets below).

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value

cannot be reliably measured are measured at cost less any identified impairment losses at each balance sheet date

subsequent to initial recognition (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired

where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the

financial asset, the estimated future cash flows of the financial assets have been impacted.

For an available-for sale equity investment, a significant or prolonged decline in the fair value of that investment below

its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organization.

For certain categories of financial asset, such as trade and bills receivables, assets that are assessed not to be impaired

individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a

portfolio of receivables could include the Group’s past experience of collecting payments and changes in national or

local economic conditions that correlate with default on receivables.





Impairment of financial assets(continued)

For financial assets carried at amortized cost, an impairment loss is recognized in profit or loss when there is objective

evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the

present value of the estimated future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s

carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return

for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the

exception of trade and bills receivables and other receivables, where the carrying amounts are reduced through the use of

an allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When

a trade and bills receivables and other receivables are considered uncollectible, it is written off against the allowance

account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of impairment loss decreases and

the decrease can be related objectively to an event occurring after the impairment losses was recognized, the previously

recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the

date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been

recognized.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods.

Any increase in fair value subsequent to impairment loss is recognized initially in other comprehensive income and

accumulated in equity.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the

contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its

liabilities.





Financial liabilities

The Group’s financial liabilities including accounts payable and bills, other payables, amounts due to Parent Company

and its subsidiary companies and bank borrowings are subsequently measured at amortized cost, using the effective

interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognized when the rights to receive cash flows from the assets expire or, the financial assets are

transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On

derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration

received and receivable and the cumulative gain or loss that had been recognized directly in equity is recognized in profit

or loss.

Financial liabilities are derecognized when the obligation specified in the relevant contract is discharged, cancelled or

expires. The difference between the carrying amount of the financial liability derecognized and the consideration paid

and payable is recognized in profit or loss.

Accounting for derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-

measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative

is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain

derivatives as either: (i) hedges of the fair value of recognized assets or liabilities (fair value hedge); and (ii) hedges of

highly probable forecast transactions (cash flow hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged

items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group

also documents its assessment, both at the inception of the hedge and on an ongoing basis, of whether the derivatives

that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged

items.

The fair values of various derivative instruments used for hedging purposes are disclosed in note 36. The full fair value

of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is

more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12

months.





Accounting for derivative financial instruments and hedging activities (Continued)

(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized initially

in consolidated income statement immediately, together with any changes in the fair value of the hedged asset or

liability that are attributable to the hedged risk. To the extent that the derivative is not effective as a hedge, gains

and losses are recognized in the consolidated income statement as gains or losses on derivative instruments.

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges

are recognized initially in other comprehensive income and accumulated in equity. The gain or loss relating to

the ineffective portion is recognized immediately in the consolidated income statement. Amounts accumulated in

equity are recognized in the consolidated income statement as the underlying hedged items are recognized.

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to

profit or loss in the periods when the hedged item is recognised in profit or loss.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,

any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast

transaction is ultimately recognized in the consolidated income statement. When a forecast transaction is no

longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the

consolidated income statement.

(iii) Derivatives that do not qualify for hedge accounting and those not designated as hedging instruments

Changes in the fair value of any derivative instruments that do not qualify for hedge accounting and those not

designated as hedges are recognized immediately in the consolidated income statement.




Related Parties

For the purposes of these financial statements, a party is considered to be related to the Group if:

(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or

exercise significant influence over the Group in making financial and operating policy decisions, or has joint

control over the Group;

(ii) the Group and the party are subject to common control;

(iii) the party is an associate of the Group or a joint venture in which the Group is a venturer;

(iv) the party is a member of key management personnel of the Group or the Group’s parent, or a close family member

of such an individual, or is an entity under the control, joint control or significant influence of such individuals;

(v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or

significant influence of such individuals; or

(vi) the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that

is a related party of the Group.



5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 4, management is required to make

judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent

from other sources. The estimates and associated assumptions are based on historical experience and other factors that

are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the

revision and future periods if the revision affects both current and future periods.

Depreciation of property, plant and equipment

The cost of mining structures is depreciated using the unit of production method based on the estimated production

volume for which the structure was designed. The management exercises their judgment in estimating the useful lives

of the depreciable assets and the production volume of the mine. The estimated coal production volumes are updated

at regular intervals and have taken into account recent production and technical information about each mine. These

changes are considered a change in estimate for accounting purposes and are reflected on a prospective basis in related

depreciation rates. Estimates of the production volume are inherently imprecise and represent only approximate

amounts because of the subjective judgements involved in developing such information.

Amortization of assets

Coal reserves, coal resources and rail access rights are amortized on a straight line basis or unit of production basis

over the shorter of their useful lives and the contractual period. The expensing of overburden removal costs is based on

saleable coal production over estimated economically recoverable reserves. The useful lives are estimated on the basis

of the total proven and probable reserves of the coal mine. Proven and probable coal reserve estimates are updated at

regular intervals and have taken into account recent production and technical information about each mine.

Provision for land subsidence, restoration, rehabilitation and environmental costs

The provision is reviewed regularly to verify that it properly reflects the remaining obligation arising from the current

and past mining activities. Provision for land subsidence, restoration, rehabilitation and environmental costs are

determined by the management based on their best estimates of the current and future costs, latest government policies

and past experiences.



5. KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to

which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows

expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. As at

December 31, 2010, the carrying amount of goodwill is RMB1,196,586,000 (2009: RMB1,305,345,000).

Cash flow projections during the budget period for each of the above units are based on the budgeted revenue and

expected gross margins during the budget period and the raw materials price inflation during the budget period.

Expected cash inflows/outflows have been determined based on past performance and management’s expectations for

the market development.

Estimated impairment of property, plant and equipment

When there is an impairment indicator, the Group takes into consideration the estimation of future cash flows. The

amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value

of estimated future cash flows. Where the actual future cash flows are less than expected, a material impairment loss may

arise. In estimating the future cash flows, the management have taken into account the recent production and technical

advancement. As prices and cost levels change from year to year, the estimate of the future cash flow also changes.

Notwithstanding the management has used all the available information to make their impairment assessment, inherent

uncertainty exists on conditions of the mine and of the environment and actual written off may be higher than the

amount estimated. As at December 31, 2010, the carrying amounts of property, plant and equipment is approximately

RMB19,874,615,000 (2009: RMB18,877,134,000). During the year ended December 31, 2010, RMB1,491,000 was written

off as expenses (2009: RMB14,199,000; 2008: nil). In addition, during the year ended December 31, 2010, impairment

loss on property, plant and equipment of RMB97,559,000 was recognized (2009: nil) by the Group and details of this

impairment are set out in note 24.

6. SEGMENT INFORMATION

The Group is engaged primarily in the coal mining business. The Group is also engaged in the coal railway

transportation business. The Company does not currently have direct export rights in the PRC and all of its export

sales is made through China National Coal Industry Import and Export Corporation (“National Coal Corporation”),

Minmetals Trading Co., Ltd. (“Minmetals Trading”) or Shanxi Coal Imp. & Exp. Group Corp. (“Shanxi Coal

Corporation”). The final customer destination of the Company’s export sales is determined by the Company, National

Coal Corporation, Minmetals Trading or Shanxi Coal Corporation. Certain of the Company’s subsidiaries and

associates are engaged in trading and processing of mining machinery and the transportation business via rivers and

lakes and financial services in the PRC. No separate segment information about these businesses is presented in these

financial statements as the underlying gross sales, results and assets of these businesses, which are currently included in

the coal mining business segment, are insignificant to the Group. Certain of the Company’s subsidiaries are engaged in

production of methanol and other chemical products, and invest in heat and electricity.

Gross revenue disclosed below is same as the turnover.



6. SEGMENT INFORMATION (continued)

For management purposes, the Group is currently organized into three operating divisions-coal mining, coal railway

transportation and methanol, electricity and heat supply. These divisions are the basis on which the Group reports its

segment information.

Principal activities are as follows:

Coal mining – Underground and open-cut mining, preparation and sales of

coal

Coal railway transportation – Provision of railway transportation services

Methanol, electricity – Production and sales of methanol and electricity

and heat supply and related heat supply services

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note

4. Segment profit represents the profit earned by each segment without allocation of corporate expenses and directors’

emoluments, results of associates, interest income, interest expenses and income tax expenses. This is the measure

reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment

performance.

Segment information about these businesses is presented below:

INCOME STATEMENT

For the year ended December 31, 2010 Methanol, Coal railway electricity and Coal mining transportation heat supply Unallocated Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

GROSS REVENUE External 32,590,911 513,282 840,059 – – 33,944,252 Inter-segment 339,355 36,051 455,259 – (830,665) -

Total 32,930,266 549,333 1,295,318 – (830,665) 33,944,252




INCOME STATEMENT (continued)

Inter-segment revenue is charged at prices pre-determined by the relevant governmental authority.

For the year ended December 31, 2010 Methanol, Coal railway electricity and Coal mining transportation heat supply Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

RESULT Segment results 11,096,252 51,554 (459,610) – 10,688,196

Unallocated corporate expenses (473,502)Unallocated corporate income 2,669,925Interest income 187,189Share of profit of associates 2,102 – 6,768 – 8,870Interest expenses (603,343)

Profit before income taxes 12,477,335 Income taxes (3,171,043)

Profit for the year 9,306,292

BALANCE SHEET

At December 31, 2010 Methanol, Coal railway electricity and Coal mining transportation heat supply Consolidated RMB’000 RMB’000 RMB’000 RMB’000

ASSETS Segment assets 57,600,041 637,184 5,083,532 63,320,757

Interests in associates 127,102 – 947,856 1,074,958Interests in jointly controlled entities 751 – – 751Unallocated corporate assets 8,359,398

72,755,864

LIABILITIES Segment liabilities 5,170,012 38,782 2,653,337 7,862,131

Unallocated corporate liabilities 27,455,282

35,317,413




OTHER INFORMATION

For the year ended December 31, 2010 Methanol, Coal railway electricity and Coal mining transportation heat supply Unallocated Corporate Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Capital additions (note 1) 3,297,996 34,498 452,838 – 2 3,785,334

Investments in associates 125,000 – – – – 125,000

Amortization of intangible assets 341,003 5,014 3,638 – – 349,655

Release of prepaid lease payments 9,760 5,372 2,826 – – 17,958

Provision for inventories – – 4,411 – – 4,411

Impairment loss on property, plant

and equipment – – 97,559 – – 97,559

Depreciation of property, plant and equipment 1,796,579 77,399 442,427 – 3,042 2,319,447

Written off of property, plant and equipment – – 1,491 – – 1,491

Impairment losses reversed on accounts

receivable and other receivables (6,828) – 1,905 – – (4,923)

Gain on disposal of a joint venture

and subsidiaries 117,928 – – – – 117,928

Note 1: Capital additions include those arising from the acquisition of three subsidiaries during the year.

INCOME STATEMENT

For the year ended December 31, 2009 Methanol, Coal railway electricity and Coal mining transportation heat supply Unallocated Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

GROSS REVENUE External 19,947,748 267,345 462,045 – – 20,677,138Inter-segment 169,153 61,507 474,946 – (705,606) –

Total 20,116,901 328,852 936,991 – (705,606) 20,677,138







RESULT Segment results 6,353,496 (171,712) (277,320) – 5,904,464

Unallocated corporate expenses (473,221)Unallocated corporate income 2,288Interest income 187,604Share of profit of an associate – – 109,786 – 109,786Interest expenses (45,115)

Profit before income taxes 5,685,806Income taxes (1,553,312)


BALANCE SHEET



Interest in an associate – – 939,981 939,981Interests in jointly controlled entities 1,257 – – 1,257Unallocated corporate assets 9,883,113

62,432,591



33,178,298




OTHER INFORMATION


Capital additions (note 1) 24,086,467 11,401 1,219,970 – 6,954 25,324,792Investments in jointly controlled entities 1,257 – – – – 1,257Amortization of intangible assets 44,274 – 4 – – 44,278Release of prepaid lease payments 9,606 5,372 2,049 – – 17,027Depreciation of property, plant and equipment 1,409,507 86,251 295,321 – 2,199 1,793,278Written off of property, plant and equipment 13,609 – 590 – – 14,199Impairment losses reversed on accounts receivable and other receivables (14,222) – 588 – – (13,634)

Note 1: Capital additions include the increase in goodwill during the year which represents RMB766,816,000 and RMB239,879,000

in respect of coal mining and methanol, electricity and heat supply segments respectively.

Note 2: Capital additions and investments in jointly controlled entities include those arising from the acquisition of subsidiaries.

INCOME STATEMENT


GROSS REVENUE External 24,933,349 255,713 98,361 – – 25,287,423Inter-segment 131,655 88,458 – – (220,113) –

Total 25,065,004 344,171 98,361 – (220,113) 25,287,423







RESULT Segment results 9,678,304 (91,781) (185,116) – 9,401,407

Unallocated corporate expenses (580,843)Unallocated corporate income 7,401Interest income 142,990Share of loss of an associate – – (67,367) – (67,367)Interest expenses (38,360)

Profit before income taxes 8,865,228Income taxes (2,385,617)


BALANCE SHEET



Interests in an associate – – 830,195 830,195Unallocated corporate assets 9,529,317

32,338,631



5,522,021




OTHER INFORMATION


Capital additions 1,925,294 29,234 925,084 - 2,105 2,881,717

Amortization of intangible assets 35,652 - - - - 35,652

Release of prepaid lease payments 9,379 5,372 358 - - 15,109

Depreciation of property, plant

and equipment 1,009,365 79,912 49,159 - 2,373 1,140,809

Gain on disposal of property,

plant and equipment (12,317) - - - - (12,317)

Impairment losses reversed on accounts

receivable and other receivables (4,369) - - - - (4,369)

GEOGRAPHICAL INFORMATION

The following table sets out the geographical information. The geographical location of sales to external customers

is based on the location at which the services were provided or the goods delivered. The geographical location of the

specified non-current assets is based on the physical location of the asset, in the case of property, plant and equipment,

the location of the operation to which they are allocated, in the case of intangible assets and goodwill, and the location of

operations, in the case of interests in associates and jointly controlled entities.

The geographical information of sales are as follows:

Revenue from external customers For the year ended December 31, 2010 2009 2008 RMB’000 RMB’000 RMB’000

The PRC (place of domicile) 28,633,685 19,633,977 23,418,886Australia 115,227 45,121 16,346Others 5,195,340 998,040 1,852,191

Total 33,944,252 20,677,138 25,287,423




GEOGRAPHICAL INFORMATION (continued)

The geographical information of specified non-current assets are as follows:

Specified non-current assets At December 31, 2010 2009 2008 RMB’000 RMB’000 RMB’000

The PRC (place of domicile) 17,412,174 17,347,369 16,097,008Australia 25,095,982 23,334,361 849,109

Total non-current assets 42,508,156 40,681,730 16,946,117

For the year ended December 31, 2010, the revenue from coal mining segment amounted to RMB32,590,911,000 (2009:

RMB19,947,748,000; 2008: RMB24,933,349,000) which including sales to the Group’s largest customer located in the

PRC of approximately RMB4,443,729,000 (2009: RMB3,122,684,000; 2008: RMB4,413,948,000). As at December 31,

2010, accounts receivable from this customer accounted for approximately 0% (2009: 0%; 2008: 20%) of the Group’s

total accounts receivable. Other than this customer, there is no other customer whose sales accounted for 10% or more

of the Group’s total revenue.

7. NET SALES OF COAL


Coal sold in the PRC, gross 27,280,344 18,903,375 23,033,777Less: Transportation costs 316,452 305,110 356,517

Coal sold in the PRC, net 26,963,892 18,598,265 22,677,260

Coal sold outside the PRC, gross 5,310,567 1,044,373 1,899,572Less: Transportation costs 844,018 98,201 152,195

Coal sold outside the PRC, net 4,466,549 946,172 1,747,377

Net sales of coal 31,430,441 19,544,437 24,424,637

Net sales of coal represent the invoiced value of coal sold and are net of returns, discounts and transportation costs if the

invoiced value includes transportation costs to the customers.



8. COST OF SALES AND SERVICE PROVIDED


Materials 2,017,681 1,482,653 1,616,865Wages and employee benefits 4,695,000 3,281,578 2,624,821Electricity 223,639 500,518 346,401Depreciation 1,462,706 1,286,265 907,218Land subsidence, restoration, rehabilitation and environmental costs 1,545,302 1,738,103 3,279,503Annual fee and amortization of mining rights (note 23) 481,711 181,344 170,793Transportation costs 76,171 86,618 131,301Cost of traded coal 3,955,603 1,077,538 1,810,342Business tax and surcharges 505,491 419,459 388,878Others 1,838,019 535,915 925,009

16,801,323 10,589,991 12,201,131

9. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


Wages and employee benefits 1,347,221 1,402,920 1,374,698Additional medical insurance 67,420 20,919 53,068Staff training costs 65,097 35,398 24,412Depreciation 298,895 168,334 114,451Distribution charges 835,900 148,580 103,209Resource compensation fees (note) 226,578 177,842 159,938Repairs and maintenance 614,173 474,233 424,751Research and development 70,606 46,321 106,516Freight charges 24,540 28,556 20,247Property, plant and equipment written off 1,491 14,199 –Impairment loss on property, plant and equipment 97,559 – –Loss on disposal of property, plant and equipment 16,937 11,252 –Legal and professional fees 71,152 88,320 76,328Social welfare and insurance 135,341 101,693 138,264Utilities relating to administrative buildings 368,063 239,439 147,737Environmental protection 110,254 82,426 48,028Travelling, entertainment and promotion 98,709 79,734 80,109Foreign exchange losses – – 328,858Coal price adjustment fund 289,652 266,876 264,815Bonus payments – 67,842 49,977Others 354,316 365,357 316,625

5,093,904 3,820,241 3,832,031

Note: In accordance with the relevant regulations, the Group pays resource compensation fees (effectively a government levy) to the

Ministry of Geology and Mineral Resources at the rate of 1% on the sales value of raw coal.



10. OTHER INCOME


Dividend income 4,504 2,288 7,401Gain on sales of auxiliary materials 22,820 25,769 37,762Government grants 43,273 29,839 3,500Interest income from bank deposits 187,189 187,604 142,990Interest income from entrusted loan – – 132,230Exchange gain, net 2,665,421 46,151 –Gain on disposal of a joint venture and subsidiaries 117,928 – –Others 66,946 19,368 27,610

3,108,081 311,019 351,493

The above dividend income is from listed investments.

11. INTEREST EXPENSE


Interest expenses on: – bank borrowings wholly repayable within 5 years 594,679 18,838 20,537 – bank borrowings not wholly repayable within 5 years 5,369 11,396 15,899 – bills receivable discounted without recourse 2,695 13,665 75Deemed interest expenses in respect of acquisition of Jining III 600 1,216 1,849

603,343 45,115 38,360

12. INCOME TAXES


Income taxes: Current taxes 2,467,741 1,771,674 2,351,759 Under provision in prior years 10,085 42,221 265,390

2,477,826 1,813,895 2,617,149Deferred tax charge (note 38) 693,217 (260,583) (231,532)

3,171,043 1,553,312 2,385,617

The Company and its subsidiaries in the PRC are subject to a standard income tax rate of 25% on its taxable income

(2009: 25%; 2008: 25%).

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.



12. INCOME TAXES (continued)

The total charge for the year can be reconciled to the profit per the consolidated income statement as follows:


Standard income tax rate in the PRC 25% 25% 25%Standard income tax rate applied to income before income taxes 3,119,333 1,421,452 2,216,307 Reconciling items: Tax effect of future development fund deductible for tax purposes (18,601) (20,436) –Deemed interest not deductible for tax purposes 150 304 462Effect of income exempt from taxation (242,252) (64,170) (74,491)Reversal of impairment loss on doubtful debts not subject to tax – – (11,398)Deemed interest income from subsidiaries subject to tax 18,571 31,134 40,213Tax effect of tax losses not recognized 150,590 135,268 28Under provision in prior years 10,085 42,221 265,390Utilization of unrecognized tax losses in prior years – – (51,600)Effect of tax rate differences in other taxation jurisdictions 135,942 1,504 –Others (2,775) 6,035 706

Income taxes 3,171,043 1,553,312 2,385,617

Effective income tax rate 25% 27% 27%



13. PROFIT FOR THE YEAR


Profit for the year has been arrived at after charging:

Amortization of intangible assets 349,655 44,278 35,652Depreciation of property, plant and equipment 2,319,447 1,793,278 1,140,809

Total depreciation and amortization 2,669,102 1,837,556 1,176,461

Release of prepaid lease payments 17,958 17,027 15,109Auditors’ remuneration 16,763 12,401 10,157Staff costs, including directors’ and supervisors’ emoluments 5,988,821 4,897,951 4,358,556Retirement benefit scheme contributions (included in staff costs above) 785,051 1,092,817 867,808Cost of inventories 16,167,748 9,219,686 11,986,520 Including: provision for inventories 4,411 – –Exchange loss, net – – 328,858

and crediting:

Exchange gains, net (2,665,421) (46,151) -Gain on disposal of property, plant and equipment – – (12,317)Reversal of impairment loss on accounts receivable and other receivables (4,923) (13,634) (4,369)



14. DIRECTORS’ AND SUPERVISORS’ REMUNERATION AND FIVE HIGHEST PAID

INDIVIDUALS

(a) Directors’ and supervisors’ emoluments

Details of the directors’ and supervisors’ emoluments are as follows:

For the year ended December 31, 2010 Salaries, Retirement allowance and other benefit scheme Fees benefits in kind contributions Total RMB’000 RMB’000 RMB’000 RMB’000

Independent non-executive directors Pu Hongjiu 113 – – 113 Zhai Xigui 113 – – 113Li Weian 113 – – 113Wang Junyan 113 – – 113

452 – – 452

Executive directors Wang Xin – – – –Geng Jiahuai – – – –Li Weimin – 188 38 226 Shi Xuerang – – – –Chen Changchun – – – –Wu Yuxiang – 269 54 323Wang Xinkun – 343 69 412Zhang Baocai – 312 62 374Dong Yunqing – 309 62 371

– 1,421 285 1,706

Supervisors Song Guo – – – –Zhang Shengdong – – – –Zhou Shoucheng – – – –Zhen Ailan – – – –Wei Huanmin – 305 61 366Xu Bentai – 346 69 415

– 651 130 781

Other management team Jin Tai – 189 38 227Zhang Yingmin – 189 38 227He Ye – 188 38 226Tian Fengze – 291 58 349Shi Chenzhong – 342 68 410Qu Tianzhi – 285 57 342Ni Xinghua – 328 66 394Lai Cunliang – 664 – 664

– 2,476 363 2,839




INDIVIDUALS (continued)

(a) Directors’ and supervisors’ emoluments (continued)



Independent non-executive directors Pu Hongjiu 109 – – 109Zhai Xigui 109 – – 109Li Weian 109 – – 109Wang Junyan 109 – – 109

436 – – 436

Executive directors Wang Xin – – – –Geng Jiahuai – – – –Yang Deyu – 148 29 177Shi Xuerang – – – –Chen Changchun – – – –Wu Yuxiang – 220 44 264Wang Xinkun – 250 50 300Zhang Baocai – 220 44 264Dong Yunqing – 220 44 264

– 1,058 211 1,269

Supervisors Song Guo – – – –Zhang Shengdong – – – –Zhou Shoucheng – – – –Zhen Ailan – – – –Wei Huanmin – 220 44 264Xu Bentai – 259 52 311

– 479 96 575

Other management team Li Weimin – 61 12 73Jin Tai – 61 13 74Zhang Yingmin – 61 12 73He Ye – 61 12 73Tian Fengze – 221 44 265Shi Chenzhong – 250 50 300Qu Tianzhi – 250 50 300Ni Xinghua – 250 50 300Lai Cunliang – 540 – 540

– 1,755 243 1,998





(a) Directors’ and supervisors’ emoluments (continued)



Independent non-executive directors Pu Hongjiu 104 – – 104Cui Jianmin 50 – – 50Wang Xiaojun 60 – – 60Wang Quanxi 50 – – 50Zhai Xigui 54 – – 54Li Weian 54 – – 54Wang Junyan 54 – – 54

426 – – 426

Executive directors Wang Xin – – – –Geng Jiahuai – – – –Yang Deyu – – – –Shi Xuerang – – – –Chen Changchun – – – –Wu Yuxiang – 192 38 230Wang Xinkun – 218 44 262Zhang Baocai – 191 38 229Dong Yunqing – 192 38 230

– 793 158 951

Supervisors Meng Xianchang – – – –Song Guo – – – –Zhang Shengdong – – – –Liu Weixin – – – –Zhou Shoucheng – – – –Zhen Ailan – – – –Wei Huanmin – 192 38 230Xu Bentai – 207 41 248

– 399 79 478

Other management team Jin Tai – – – –Zhang Yingmin – – – –He Ye – – – –Tian Fengze – 192 38 230Shi Chenzhong – 218 44 262Qu Tianzhi – 218 44 262Ni Xinghua – 218 44 262Lai Cunliang – 508 102 610

– 1,354 272 1,626

No directors waived any emoluments in each of the year ended December 31, 2010, 2009 and 2008.





(b) Employees’ emoluments

The five highest paid individuals in the Group included no director for the year ended December 31, 2010 (2009:

nil; 2008: nil). The emoluments of the five highest paid individuals (2009: five; 2008: five) were stated as follows:


Salaries, allowance and other benefits in kind 4,411 6,380 6,787Retirement benefit scheme contributions 228 574 611Discretionary bonuses 28 228 242

4,667 7,182 7,640

Their emoluments were within the following bands:

Year ended December 31, 2010 2009 2008 No. of No. of No. of employees employees employees

Nil to HK$1,000,000 3 – -HK$1,000,001 to HK$1,500,000 1 3 3HK$1,500,001 to HK$2,000,000 1 1 1HK$2,000,001 to HK$2,500,000 – 1 1



15. DIVIDEND RECOGNIZED AS DISTRIBUTION DURING THE YEAR


2009 final dividend, RMB0.250 per share (2009: 2008 final dividend RMB0.400; 2008: 2007 final dividend RMB0.170) 1,229,600 1,967,360 836,128

In the annual general meeting held on June 27, 2008, a final dividend in respect of the year ended December 31, 2007

was approved by the shareholders and paid to the shareholders of the Company.





The board of directors proposes to declare a final dividend of approximately RMB2,901,856,000 calculated based on a

total number of 4,918,400,000 shares issued at RMB1 each, at RMB0.59 per share, in respect of the year ended December

31, 2010. The declaration and payment of the final dividend needs to be approved by the shareholders of the Company

by way of an ordinary resolution in accordance with the requirements of the Company’s Articles of Association. A

shareholders’ general meeting will be held for the purpose of considering and, if thought fit, approving this ordinary

resolution.

16. EARNINGS PER SHARE AND PER ADS

The calculation of the earnings per share attributable to the equity holders of the Company for the years ended

December 31, 2010, 2009 and 2008 is based on the profit attributable to the equity holders of the Company for the year

of RMB9,281,386,000, RMB4,117,322,000 and RMB6,488,908,000 and on the 4,918,400,000 shares in issue, during each

of the three years.

The earnings per ADS have been calculated based on the profit for the relevant periods and on one ADS, being

equivalent to 10 H shares. The equivalent H shares to one ADS have been changed from 50 to 10 H shares from June 27,

2008. The new ADS were distributed to ADS holders on July 3, 2008.

No diluted earnings per share has been presented as there are no dilutive potential shares in issue during the years ended

December 31, 2010, 2009 and 2008.



17. BANK BALANCES AND CASH/TERM DEPOSITS AND RESTRICTED CASH

Bank balances carry interest at market rates which ranged from 0.36% to 4.75% (2009: from 0.36% to 3.75%) per annum.

At the balance sheet dates, the short-term restricted cash, which carry interest at market rates of 0.36%-4.53 % per

annum (2009: 0.36%-3.47%), represents the bank deposits pledged to certain banks to secure banking facilities granted

to the Group. The long-term amount represents the bank deposits placed as guarantee for the future payments of

rehabilitation costs as required by the Australian government and as guarantee for borrowings. The long-term deposits

carry interest rate of 5.20% (2009: of 4.41%) per annum.

The term deposits carry fixed interest rate of 2.25% to 4.80% (2009: 1.17% to 4.53%) per annum.

18. BILLS AND ACCOUNTS RECEIVABLE

At December 31, 2010 2009 RMB’000 RMB’000

Accounts receivable – From third parties 439,646 357,282 – From a jointly controlled entity 53,450 81,329

Total accounts receivable 493,096 438,611Less: Impairment loss (5,406) (4,542)

487,690 434,069Total bills receivable 9,529,570 4,289,853

Total bills and accounts receivable, net 10,017,260 4,723,922

Bills receivable represents unconditional orders in writing issued by or negotiated from customers of the Group for

completed sale orders which entitle the Group to collect a sum of money from banks or other parties. The bills are non-

interest bearing and have a maturity of six months.

According to the credit rating of different customers, the Group allows a range of credit periods to its trade customers

not exceeding 180 days.

The following is an aged analysis of bills and accounts receivable based on the invoice dates at the balance sheet dates:


1-90 days 4,738,930 2,592,71391-180 days 5,278,330 2,131,209

10,017,260 4,723,922

Before accepting any new customer, the Group assesses the potential customer's credit quality and defines credit limits

by customer. Limits attributed to customers are reviewed once a year.



18. BILLS AND ACCOUNTS RECEIVABLE (continued)

There are no significant trade receivables which are past due but not yet impaired on both balance sheet dates. The

Group does not hold any collateral over these balances. The average age of these receivables is 93 days (2009: 88 days).

The management closely monitors the credit quality of accounts receivable and consider the balance that are neither past

due nor impaired are of good credit quality.

The Group has provided fully for all receivables over 3 years because historical experience is such that receivables that

are past due beyond 3 years are generally not recoverable. For receivable aged over 4 years and considered irrecoverable

by the management will be written off.

An analysis of the impairment loss on bills and accounts receivable is as follows:


Balance at January 1 4,542 29,509Provided for the year 895 335Written off recognized – (5,797)Reversal (31) (19,505)

Balance at December 31 5,406 4,542

Included in the allowance for doubtful debts is an allowance of RMB5.4 million (2009: RMB 4.5 million) for individually

impaired trade receivables, which are mainly due from corporate customers in the PRC and considered irrecoverable by

the management after consideration on the credit quality of those individual customers, the ongoing relationship with

the Group and the aging of these receivables. The impairment recognized represents the difference between the carrying

amount of these trade receivables and the present value of the amounts. The Group does not hold any collateral over

these balances.

19. INVENTORIES


COST Methanol 10,279 27,320Auxiliary materials, spare parts and small tools 372,046 288,550Coal products 1,263,791 570,490

1,646,116 886,360



20. PREPAYMENTS AND OTHER RECEIVABLES


Advances to suppliers 243,210 75,623Prepaid freight charges and related handling charges – 5,232Due from a jointly controlled entity (note) 115,480 66,321Deposit for environment protection 254,193 226,252Prepaid relocation costs of inhabitants 1,709,872 1,288,453Others 290,931 206,348

2,613,686 1,868,229

Included in the above balances as of December 31, 2010 is an impairment loss of RMB16,067,000 (2009:

RMB21,854,000). During the year ended December 31, 2009, the Group wrote off impairment loss of RMB536,000.

The Group has provided fully for all receivables over 3 years because historical experience is such that receivables

that are past due beyond 3 years are generally not recoverable. Receivable will be written off, if aged over 4 years and

considered irrecoverable by the management after considering the credit quality of the individual party and the nature of

the amount overdue.

Note: The amount due from a jointly controlled entity is unsecured, interest-free and has no fixed repayment term.

21. PREPAID LEASE PAYMENTS


Current portion 18,280 17,121Non-current portion 728,082 691,339

746,362 708,460

The amounts represent prepaid lease payments for land use rights which are situated in the PRC and have a term of 45

to 50 years from the date of grant of land use rights certificates.

22. PREPAYMENT FOR RESOURCES COMPENSATION FEES

In accordance with the relevant regulations, the Shanxi Group is required to pay resources compensation fees to the

Heshun Municipal Coal Industry Bureau at a rate of RMB2.70 per tonne of raw coal mined. During the year 2006,

Shanxi Group was requested by the relevant government to prepay the fees based on production volume of 10 million

tonnes. At the balance sheet date, the amount represented the prepayment for resources compensation fees not yet

utilized. The current portion represents the amount to be utilized in the coming year which is estimated based on

expected production volume.



23. INTANGIBLE ASSETS

Coal Rail access Water Coal reserves resources Technology rights Licenses Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

COST At January 1, 2009 1,133,680 – – – – – 1,133,680Exchange re-alignment 25,998 – – – – – 25,998Additions for the year – – – – – 233 233Acquisition of Felix 13,782,538 3,859,559 153,235 41,523 7,356 3,812 17,848,023

At December 31, 2009 and at January 1, 2010 14,942,216 3,859,559 153,235 41,523 7,356 4,045 19,007,934Exchange re-alignment 1,224,643 354,020 14,613 2,135 699 713 1,596,823Acquisition of Yize – – – – 124,565 7,420 131,985Additions for the year – 25,921 – 1,317 – 8,114 35,352Transfer 206,922 (206,922) – – – – –Disposal of a joint venture and subsidiaries (539,070) (127,293) – (41,410) – (348) (708,121)

At December 31, 2010 15,834,711 3,905,285 167,848 3,565 132,620 19,944 20,063,973

AMORTIZATION At January 1, 2009 93,973 – – – – – 93,973Exchange re-alignment 3,009 – – – – – 3,009Provided for the year 44,274 – – – – 4 44,278

At December 31, 2009 and at January 1, 2010 141,256 – – – – 4 141,260Exchange re-alignment 8,601 – – 11 – 100 8,712Provided for the year 341,003 – – 5,014 – 3,638 349,655Disposal of a joint venture and subsidiaries (63,976) – – (4,773) – (69) (68,818)

At December 31, 2010 426,884 – – 252 – 3,673 430,809

CARRYING VALUES At December 31, 2010 15,407,827 3,905,285 167,848 3,313 132,620 16,271 19,633,164

At December 31, 2009 14,800,960 3,859,559 153,235 41,523 7,356 4,041 18,866,674

The Parent Company and the Company have entered into a mining rights agreement pursuant to which the Company

has agreed to pay to the Parent Company, effective from September 25, 1997, an annual fee of RMB12,980,000 as

compensation for the Parent Company’s agreement to give up the mining rights associated with the Xinglongzhuang

coal mine, Baodian coal mine, Nantun coal mine, Dongtan coal mine and Jining II. The annual fee is subject to change

after a ten-year period. Up to the date of these financial statements, compensation fee of RMB5 per tonne of raw coal

mined amounting to RMB140,708,000 (2009: RMB137,070,000) for the year has been preliminary agreed. The revised

compensation fees are to be settled with governmental authority directly. The actual amount of compensation fee

payable each year is still to be confirmed by the governmental authority.



23. INTANGIBLE ASSETS (continued)

The other mining rights (coal reserves) are amortized on the following basis:

Amortization method

Jining III Unit of production method

Zhaolou Unit of production method

Tianchi Unit of production method

Austar Unit of production method

Ashton Unit of production method

Moolarben Unit of production method

Yarrabee Unit of production method

Rail access rights are amortized on a straight line basis or unit of production basis over the life of the mine.

Technology has not yet reached the stage of commercial application and therefore is not amortized.

Water licenses are amortized over the life of coal mine. The mining activities of the relevant locations have not yet been

started and therefore, no amortization was provided.

Other intangible assets namely represent computer software which is amortized on a straight line basis of 2.5 to 5 years

over the useful life.

Amortization expense of the mining rights for the year of RMB341,003,000 (2009: RMB44,278,000) has been included

in cost of sales and service provided. Amortization expense of other intangible assets for the year of RMB8,652,000 has

been included in selling, general and administrative expenses.

At December 31, 2010, intangible assets with a carrying amount of approximately RMB18,297,975,000 (2009:

RMB4,288,410,000) have been pledged to secure the borrowings of the Company’s subsidiaries (Note 35).



24. PROPERTY, PLANT AND EQUIPMENT

Plant,

Freehold land Harbor works Railway Mining machinery Transportation Construction

in Australia Buildings and crafts structures structures and equipment equipment in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

COST

At January 1, 2009 42,279 3,005,627 255,805 868,967 3,698,573 10,492,130 377,625 4,827,451 23,568,457

Exchange re-alignment 14,037 2,933 – – – 261,896 60 42,608 321,534

Acquisition of Hua Ju Energy – 290,362 – – – 434,929 4,050 25,872 755,213

Acquisition of Felix 223,963 35,403 – – 486,736 1,882,269 – 918,536 3,546,907

Additions 9,656 1,084 – – – 163,300 6,981 1,904,628 2,085,649

Transfers 577 481,045 – 480,557 994,476 4,553,842 21,366 (6,531,863) –

Written off – – – – – – – (14,199) (14,199)

Disposals – (39,410) (2,127) (2,936) – (359,180) (36,637) – (440,290)

At December 31, 2009

and January 1, 2010 290,512 3,777,044 253,678 1,346,588 5,179,785 17,429,186 373,445 1,173,033 29,823,271

Exchange re-alignment 26,598 10,471 – – 67,144 357,436 25 77,736 539,410

Acquisition of Yize – 4,670 – – – 8 73 – 4,751

Additions 41,764 77,300 – – 281,451 94,707 2,337 3,059,827 3,557,386

Transfers 10 89,868 – 95,596 271,913 2,897,788 23,330 (3,378,505) –

Written off – – – – – – – (1,491) (1,491)

Disposals – (18,055) – (27,588) – (514,073) (10,279) – (569,995)

Disposal of a joint venture

and subsidiaries (66,076) – – – (87,366) (173,670) – – (327,112)

At December 31, 2010 292,808 3,941,298 253,678 1,414,596 5,712,927 20,091,382 388,931 930,600 33,026,220

ACCUMULATED DEPRECIATION

AND IMPAIRMENT

At January 1, 2009 – 1,318,920 66,930 385,292 1,800,077 5,607,220 240,572 – 9,419,011

Exchange re-alignment – 936 – – – 82,274 50 – 83,260

Provided for the year – 220,440 12,010 35,765 86,087 1,399,981 38,995 – 1,793,278

Eliminated on disposals – (9,783) (1,473) (2,226) – (302,184) (33,746) – (349,412)

At December 31, 2009

and January 1, 2010 - 1,530,513 77,467 418,831 1,886,164 6,787,291 245,871 - 10,946,137

Exchange re-alignment – 890 – – 7,470 56,790 20 – 65,170

Provided for the year – 109,779 5,819 165,254 271,295 1,836,394 38,085 – 2,426,626

Impairment loss – 15,356 – 4,127 – 78,076 – – 97,559

Eliminated on disposals – (4,761) – (4,858) – (328,379) (9,614) – (347,612)

Disposal a of a joint venture

and subsidiaries – – – – (9,799) (26,476) – – (36,275)

At December 31, 2010 – 1,651,777 83,286 583,354 2,155,130 8,403,696 274,362 – 13,151,605

CARRYING VALUES

At December 31, 2010 292,808 2,289,521 170,392 831,242 3,557,797 11,687,686 114,569 930,600 19,874,615

At December 31, 2009 290,512 2,246,531 176,211 927,757 3,293,621 10,641,895 127,574 1,173,033 18,877,134



24. PROPERTY, PLANT AND EQUIPMENT (continued)

The following estimated useful lives are used for the depreciation of property, plant and equipment, other than

construction in progress and freehold land:

Buildings 10 to 30 years

Harbor works and crafts 40 years

Railway structures 15 to 25 years

Plant, machinery and equipment 2.5 to 25 years

Transportation equipment 6 to 18 years

Transportation equipment includes vessels which are depreciated over the estimated useful lives of 18 years.

The mining structures include the main and auxiliary mine shafts and underground tunnels. Depreciation is provided

to write off the cost of the mining structures using the units of production method based on the estimated production

volume for which the structure was designed and the contractual period of the relevant mining rights.

During the year ended December 31, 2010, the directors conducted a review of the Group’s mining assets and

determined that a number of those assets were impaired, due to physical damage and technical obsolescence.

Accordingly, an aggregate amount of RMB1,491,000 (2009: RMB14,199,000) have been written off in respect of

construction in progress including railway projects and water engineering projects.

At December 31, 2010, property, plant and equipment with a carrying amount of approximately RMB4,361,373,000

(2009: RMB3,546,907,000) have been pledged to secure bank borrowings of the Group (Note 35).

In addition, the Group’s finance leases (Note 35) are secured by the property, plant and equipment held under the

relevant finance leases with a carrying amount of RMB856,876,000 (2009: RMB651,981,000).

As a result of shortage in raw materials supply of methanol operations, the raw material prices continue to rise.

Therefore the Group assessed the recoverable amount of property, plant and equipment and the Group recognized

impairment loss of RMB97,559,000 (included in selling, general and administrative expenses) for the year ended

December 31, 2010.

25. OVERBURDEN IN ADVANCE


Overburden in advance-cost 149,351 350,676

Overburden in advance comprises the accumulation of expenses incurred to enable access to the coal seams, and

includes direct removal costs, machinery and plant running costs. The deferred costs are presented after the deduction

of the portion that has been transferred to the income statement in the period.



26. GOODWILL

2010 2009 RMB’000 RMB’000

COST At January 1 1,305,345 298,650Acquisition of Hua Ju Energy – 239,879Acquisition of Felix – 766,816Disposal of a joint venture and subsidiaries (181,883) –Exchange re-alignment 73,124 –

At December 31 1,196,586 1,305,345

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units that are expected to

benefit from that business combination. The carrying amount of goodwill had been allocated as follows:

2010 2009 RMB’000 RMB’000

Coal Mining – Jining II 10,106 10,106 – Shandong Yanmei Shipping Co., Ltd 10,046 10,046 – Heze 35,645 35,645 – Shanxi Group 145,613 145,613 – Felix 658,057 766,816 Coal Railway Transportation – Railway Assets 97,240 97,240 Electricity and heat supply – Hua Ju Energy 239,879 239,879

1,196,586 1,305,345

The recoverable amounts of goodwill from each of the above cash generating units have been determined on the basis

of value in use calculations. The recoverable amounts are based on certain similar key assumptions on discount rates,

growth rates and expected changes in selling prices and direct cost. All value in use calculations use cash flow projections

based on financial budgets approved by management covering a 5-year period, using a zero percent growth rate and

with a discount rate of 8-10% (2009: 8%).

The cash flows beyond the 5-year period are extrapolated for 5 years using a zero percent growth rate. Cash flow

projections during the budget period for each of the above units are based on the budgeted revenue and expected gross

margins during the budget period and the same raw materials price inflation during the budget period. Expected cash

inflows/outflows, which include budgeted sales, gross margin and raw material price inflation, have been determined

based on past performance and management’s expectations for the market development. Management believes that

any reasonably possible change in any of these assumptions would not cause the carrying amount of each of the above

units to exceed the recoverable amount of each of the above units. During the years ended December 31, 2010 and 2009,

management of the Group determined that there are no impairments of any of its cash-generating units containing

goodwill.



27. INVESTMENTS IN SECURITIES

The investments in securities represent available-for-sale equity investments:


Equity securities listed on the SSE – Stated at fair value 194,258 264,672Unlisted equity securities 30,184 30,623

224,442 295,295

Previously, the Group invested in certain state legal person shares of Shenergy Company Limited and Jiangsu Lian Yun

Gang Port Corporation Limited. These shares were not tradable.

Pursuant to the share reform plan of Shenergy Company Limited carried out in 2006, the non-tradable legal person

shares with the investment cost of RMB60,421,000 held by the Company were converted into tradable shares on August

17, 2006. Under this share reform plan, the Company has committed that the Company will not sell more than one-

third of the shares held as of August 17, 2005 within one year after August 17, 2006; and two-third of the shares held as

of August 17, 2005 within two years after August 17, 2006. This investment is presented as listed securities stated at fair

value as at December 31, 2010 at the amount of RMB185,661,000 (2009: RMB254,046,000).

On April 26, 2007, Jiangsu Lian Yun Gang Port Corporation Limited became a public company with its shares listed in

SSE. The Company has committed not to sell its holding, or transfer to others before April 28, 2008. This investment is

presented as listed securities which amount to RMB8,597,000 as at December 31, 2010 (2009: RMB10,626,000).

The investments in equity securities listed on the SSE are carried at fair value determined according to the quoted

market prices in an active market.

The unlisted equity securities are stated at cost less impairment at each balance sheet date because the range of

reasonable fair value estimates is so significant that the directors of the Company are of the opinion that their fair value

cannot be measured reliably.



28. INTERESTS IN ASSOCIATES


Cost of investments in associates 1,025,000 900,000Share of post-acquisition profit and other comprehensive income 49,958 39,981

1,074,958 939,981

Information on major associates is as follows:

At December 31, Place of establishment Class of Principal 2010 2009Name of associate and operation shares held activity Interest held Interest held

Huadian Zouxian Power PRC Registered Electricity 30% 30%

Generation Company Limited Capital generation business

Yankuang Group Finance PRC Registered Financial services 25% –

Company Limited Capital

Huadian Zouxian Power Generation Company Limited and Yankuang Group Finance Company Limited are held by the

Company directly.

Summarized financial information in respect of the Group’s associates is set out below:


Total assets 12,631,030 6,945,366Total liabilities (8,963,100) (3,812,095)

Net assets 3,667,930 3,133,271

Group’s share of net assets of associates 1,074,958 939,981

Year ended December 31, 2010 2009 RMB’000 RMB’000

Revenue 4,239,375 3,832,204

Profit for the year 30,968 365,954

Group’s share of profit of associates 8,870 109,786

Group’s share of other comprehensive income of associates 1,107 –



29. DEPOSITS MADE ON INVESTMENTS


Shaanxi coal mine operating company 117,926 117,926Inner Mongolia Rong Xin Chemical Co., Ltd. – 1,320Inner Mongolia Yi Feng Mining Investment Co., Ltd. – 53,880Inner Mongolia Da Xin Industrial Gases Co., Ltd. – 1,800Stamp duty paid – 95Inner Mongolia Haosheng Coal Mining Limited 2,045,753 –Yijinhuoluo Qi Nalin Tao Hai Town An Yuan Coal Mine 1,080,000 –

3,243,679 175,021

During 2006, the Company entered into a co-operative agreement with two independent third parties to establish a

company for acquiring a coal mine in Shaanxi province for operations. The Company will have to invest approximately

RMB196.8 million in order to obtain 41% equity interest. As at December 31, 2010, the Company made a deposit

of RMB118 million (2009: RMB118 million) in relation to this acquisition. As at December 31, 2010, the relevant

procedures to establish the new company are still in progress, and the establishment has not yet been completed.

During the year, the Company entered into a co-operative agreement with an independent third party to acquire the

Yijinhuoluo Qi Nalin Tao Hai Town An Yuan Coal Mine at a consideration of RMB1,435 million. As at December

31, 2010, the Company made a deposit of RMB1,080 million on this investment. According to the agreement, the

completion of acquisition is subject to the relevant approval from government authority. As at December 31, 2010, the

transfer and the relevant procedures are still in progress and the acquisition has not yet been completed.

During the year, the Company entered into a co-operative agreement with three independent companies to acquire 51%

equity interest of Inner Mongolia Haosheng Coal Mining Limited (‘Hao Sheng’) at a consideration of RMB6,649 million

and to obtain the mining rights of the Shilawusu Coal Field (‘the mining right’) in name of Hao Sheng. As at December

31, 2010, the Company made a deposit of RMB2,046 million in relation to this acquisition. As at December 31, 2010,

the relevant procedures are still in progress and the mining right has not yet been obtained. As the conditions of the

acquisition is to obtain the mining right in name of Hao Sheng, hence the acquisition has not been completed.



30. INTERESTS IN JOINTLY CONTROLLED ENTITIES


Share of net assets 751 1,257

Information on major jointly controlled entities is as follows:

At December 31, 2010 2009Name of jointly Place of establishment Class of Principal Voting Interest Voting Interest controlled entity and operation shares held activity power held power held

Australian Coal Processing Australia Ordinary shares Holding company 33.33% 60% 33.33% 60% Holdings Pty Ltd (i)

Ashton Coal Mines Australia Ordinary shares Real estate holder 33.33% 60% 33.33% 60% Limited (ii) & sales company

(i) A subsidiary of the Company holds 60% of the ordinary shares of Australian Coal Processing Holdings Pty Ltd.

Under the shareholders agreement between the subsidiary and the remaining two shareholders, all major financial

and operating policy decisions require a vote by directors who together represent shareholders holding 100% of

the shares or a vote by shareholders who together hold 100% of the shares. Therefore decisions must be passed

unanimously by directors or shareholders and the subsidiary’s voting power is equivalent to 33.33%.

(ii) A subsidiary of the Company holds 60% of the ordinary shares of Ashton Coal Mines Limited. Under the

shareholders agreement between the subsidiary and the remaining two shareholders, all major financial and

operating policy decisions require a unanimous resolution of the shareholders. Therefore decisions must be passed

unanimously by shareholders and the subsidiary’s voting power is equivalent to 33.33%.

(iii) The above jointly controlled entities are held indirectly by the Company. These entities were obtained from

the acquisition of Felix at the end of 2009 and therefore there was no share of profit or loss of jointly controlled

entities in 2009.



30. INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued)

Summarized financial information in respect of the Group's jointly controlled entities is set out below:


Total assets 82,698 245,024Total liabilities (81,447) (242,929)

Net assets 1,251 2,095

Group’s share of net assets of jointly controlled entities 751 1,257


Revenue 2,029,948 –

Loss for the year (770) –

Group’s share of net loss of jointly controlled entities (462) –

31. INTERESTS IN JOINT VENTURES

Information on major joint ventures (other than jointly controlled entities) is as follows:

At December 31, Place of establishment 2010 2009Name of joint venture and operation Principal activity Interest held Interest held

Boonal joint venture Australia Provision of a 50% 50% coal haul road and train load out facilities Athena joint venture Australia Coal exploration 51% 51% Ashton joint venture Australia Development and 60% 60% operation of open-cut and underground coal mines Moolarben joint venture Australia Development and operation of open-cut and underground coal mines 80% 80%

The above joint ventures are established and operated as unincorporated businesses and are held indirectly by the

Company. These joint ventures are consolidated into the Company's consolidated financial statements due to the

acquisition of Felix. Therefore results of joint ventures were not shared by the Group during 2009.



31. INTERESTS IN JOINT VENTURES (continued)

The Group's interest in the assets and liabilities of the joint ventures are set out below:


Current assets 588,626 537,378Non-current assets 19,264,652 18,677,130Current liabilities (218,206) (326,604)Non-current liabilities (57,218) (30,327)

19,577,854 18,857,577

The Group's share of revenue, expenses and profit before income tax of the joint ventures are set out below:


Revenue 28,834 –Expenses (2,138,986) –

Loss before income tax (2,110,152) –

The assets and liabilities as at December 31, 2009 included the Minerva joint venture disposed of during the year (note

45).



32. BILLS AND ACCOUNTS PAYABLE


Accounts payable – To third parties 1,420,042 1,242,349 – To a jointly controlled entity 7,943 5,667

1,427,985 1,248,016Bills payable 126,459 118,960

1,554,444 1,366,976

The following is an aged analysis of bills and accounts payable based on the invoice dates at the balance sheet date:


1-90 days 1,321,149 1,153,68691-180 days 78,647 84,400181-365 days 23,607 46,9551-2 years 131,041 81,935

1,554,444 1,366,976

The average credit period for accounts payable and bills payable is 90 days. The Group has financial risk management

policies in place to ensure that all payables are within the credit timeframe.



33. OTHER PAYABLES AND ACCRUED EXPENSES


Customers’ deposits 1,378,811 1,488,748Accrued wages 823,655 578,679Other taxes payable 280,028 166,604Payables in respect of purchases of property, plant and equipment and construction materials 324,136 643,674Accrued freight charges 5,466 58,119Accrued repairs and maintenance 24,177 35,846Accrued utility expenses 8,516 18,829Staff welfare payable 96,501 122,487Withholding tax payable 258 1,869Deposits received from employees 9,946 14,469Coal Price adjustment fund 36,031 34,764Accrued land subsidence, restoration, rehabilitation and environmental costs 691 78,356Payable on compensation fee of mining rights 412,919 272,210Payables by Felix to companies related to its directors (note) – 602,597Others 419,836 324,583

3,820,971 4,441,834

Note: To assist with the funding of the dividend paid to Felix's shareholders prior to the acquisition by the Group, certain Felix's

directors, through their related entities, loaned unsecured funds to Felix. The amounts due have been fully repaid during the

year.



34. PROVISION FOR LAND SUBSIDENCE, RESTORATION, REHABILITATION AND

ENVIRONMENTAL COSTS

2010 2009 RMB’000 RMB’000

Balance at January 1 1,608,808 450,979 Acquisition of Felix – 48,170Disposal of a joint venture and subsidiaries (6,878) –Exchange re-alignment 12,791 –Additional provision in the year 1,532,200 1,733,325Utilization of provision (693,690) (623,666)

Balance at December 31 2,453,231 1,608,808

Presented as: Current portion 2,300,637 1,564,106 Non-current portion 152,594 44,702

2,453,231 1,608,808

The provision for land subsidence, restoration, rehabilitation and environmental costs has been determined by the

directors based on their best estimates. However, in so far as the effect on the land and the environment from current

mining activities becomes apparent in future periods, the estimate of the associated costs may be subject to change in the

near term.

35. BORROWINGS


Current liabilities Bank borrowings – Unsecured borrowings (i) 156,278 22,000 – Secured borrowings (ii) 375,978 919,410Finance leases (iii) 82,669 656,703

614,925 1,598,113 Non-current liabilities Bank borrowings – Unsecured borrowings (i) 789,962 154,000 – Secured borrowings (ii) 20,871,536 20,757,728Finance leases (iii) 739,335 –

22,400,833 20,911,728

Total borrowings 23,015,758 22,509,841



35. BORROWINGS (continued)

(i) Unsecured borrowings are repayable as follows:


Within one year 156,278 22,000More than one year, but not exceeding two years 679,962 22,000More than two years, but not more than five years 66,000 66,000More than five years 44,000 66,000

Total 946,240 176,000

The balance as of December 31, 2010 represented a borrowing obtained by Shanxi Tianchi before the Company

acquired it and three new borrowings obtained by Australian subsidiaries during the year. The loan of Shanxi

Tianchi amounting to RMB154,000,000 (2009: RMB176,000,000) carried interest at 5.94% (2009: 5.94%) per

annum and is subject to adjustment based on the interest rate stipulated by the People’s Bank of China (“PBOC”).

The loan is repayable by 20 instalments over a period of 12 years, with the first instalment due in May 2008. The

amount is guaranteed by the Parent Company.

The total unsecured borrowings of Australian subsidiaries amounting to RMB792,240,000 (AUD 118,000,000)

carried interest at three-month BBSY plus a margin of 1.5% (approximately 6.3%).

(ii) Secured borrowings are repayable as follows:


Within one year 375,978 919,410More than one year, but not exceeding two years 6,925,847 6,930,623More than two years, but not more than five years 13,945,689 13,827,105

Total 21,247,514 21,677,138

Included in the balance as of December 31, 2010 are loans amounting to RMB20,133,007,000 (USD3,040,000,000)

(2009: RMB20,757,728,000) obtained by the Group for the purpose of settling the consideration in respect of

acquisition of Felix. The borrowings of RMB19,205,829,000 (USD2,900,000,000) (2009: RMB19,801,780,000) and

of RMB927,178,000 (USD 140,000,000) (2009: RMB955,948,000) carried interest at three-month LIBOR plus a

margin of 0.75% (approximately 1.05%) and at three-month LIBOR plus a margin of 0.8% (approximately 1.10%)

respectively. The borrowings are guaranteed by the Company, counter-guaranteed by the Parent Company and

secured by the Group’s term deposit (Note 17).




(ii) Secured borrowings are repayable as follows: (continued)

Included in the balance as of December 31, 2010 were three new short term borrowings amounting

to RMB161,133,000 (AUD24,000,000) carried interest at BBSY plus a margin of 1.8% (approximately

6.6%). The remaining borrowing attributable to Felix amounting to RMB953,374,000 (AUD142,000,000)

(2009:RMB919,410,000) carried interest at BBSY plus a margin of 3.8% (approximately 8.6%) (2009:

approximately 7.6%) and was obtained prior to the acquisition of Felix. These borrowings and the finance leases

are secured by the Group’s property, plant and equipment (Note 24) and intangible assets (Note 23) and are also

secured by a floating charge over the other assets of Felix.

(iii) Finance leases are repayable as follows:


Minimum lease payments Within one year 152,740 841,590More than one year, but not exceeding two years 150,125 –More than two years, but not more than five years 747,900 –

1,050,765 841,590Less: Future finance charges (228,761) (184,887)

Present value of lease payments 822,004 656,703


Present value of minimum finance lease payments Within one year 82,669 656,703More than one year, but not exceeding two years 88,144 –More than two years, but not more than five years 651,191 –

822,004 656,703Less: amounts due within one year and included in current liabilities (82,669) (656,703)

Amounts due after one year and included in non-current liabilities 739,335 –




(iii) Finance leases are repayable as follows: (continued)

Breach of loan agreement:

The bank borrowings and finance leases granted to Felix have a number of provisions including the satisfaction of

minimum net assets value and the proportion of forward contracts by Felix as at balance sheet date.

At December 31, 2009, Felix breached the above loan provisions. As a result of the breach, long term portions

of the bank borrowings and finance leases of RMB919,410,000 and RMB654,546,000 respectively have been

reclassified as current liabilities. In April 2010, Felix has obtained the waiver letter from the relevant lenders. The

lenders agreed not to demand immediate payments from Felix and the terms of borrowings remained unchanged.

Under the original borrowing terms, the bank borrowings and finance leases shall be repaid as follows:

At December 31, 2009Bank borrowings: RMB’000

Secured bank borrowings Within one year 245,176More than one year, but not more than two years 196,141More than two years, but not more than five years 478,093

Total 919,410

At December 31, 2009Finance leases: RMB’000

Present value of minimum lease payments Within one year 100,029More than one year, but not more than two years 67,301More than two years, but not more than five years 487,216

654,546

As at December 31, 2010, the Group did not breach any loan provisions.



36. DERIVATIVE FINANCIAL INSTRUMENTS


Derivatives used for cash flow hedging: Current assets – Forward foreign exchange contracts 239,476 37,760

Current liabilities – Forward foreign exchange contracts 12,269 23,980 – Interest rate swap contracts 153,909 4,353

166,178 28,333

During the year ended December 31, 2010, the Group’s subsidiaries in Australia entered into forward foreign exchange

contracts to sell or purchase specified amounts of foreign currencies in the future at stipulated exchange rates. The

objective of entering into the forward foreign exchange contracts is to reduce the foreign exchange rate related volatility

of revenue stream and capital expenditure and thereby assist in risk management for the Group. The outstanding sell

United States dollars contracts are hedging highly probable forecasted sales of coal, whereas the outstanding buy United

States dollars, Euro and Yen contracts relate to the purchase of mining equipment.

As at December 31, 2010, the outstanding notional amount to sell United States dollars (sell United States dollars and

buy Australian dollars) was approximately RMB4,169 million (2009: RMB1,143 million), all maturing within one year

(2009: within one year) with forward rates ranging from 0.8369 to 0.9887 (2009: floor price and ceiling price of 0.7661

and 0.9044 respectively).

As at December 31, 2010, the outstanding notional amount to buy United States dollars (buy United States dollars

and sell Australian dollars), buy Euro (buy Euro and sell Australian dollars) and buy Yen (buy Yen and sell Australian

dollars) was approximately RMB79 million (2009: RMB74 million), nil (2009: RMB27 million) and RMB9 million

(2009: RMB72 million) respectively, all maturing within one year (2009: within six months) with forward rates of

approximately 0.8811 (2009: 0.753), nil (2009: 0.552) and floor price and ceiling price of 63.5 and 65 (2009: floor price

and ceiling price of 71.7 and 72.7) respectively.

The Group’s Australian subsidiaries also entered into contracts with banks to hedge a proportion of borrowings issued

at variable interest rates through the use of floating-to-fixed interest rate swap contracts. As at December 31, 2010, the

outstanding notional amount was approximately RMB1,503 million (2009: RMB282 million), maturing within three

years (2009: within three years) at a hedge period of 3 months with floating rate and fixed rate of approximately 5.09%

and 5.8312% respectively (2009: 4.2783% and 5.89%).



36. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The Company also entered into contracts with three banks to hedge a proportion of borrowings issued at variable

interest rates through the use of floating-to-fixed interest rate swap contracts. As at December 31, 2010, the outstanding

notional amount was approximately RMB9,934 million (USD 1,500,000,000), maturing within four years at a hedge

period of 3 months with floating rate as LIBOR + 0.75% and fixed rate of approximately 2.75%, 2.42% and 2.41% for

the three contracts respectively. The non-current portion of the derivatives is not material and is included in current

portion.

For the year ended December 31, 2009, no ineffective hedging portion has been included in the consolidated income

statement. The effective hedging portion was recognized as current portion of derivative financial instruments in the

consolidated balance sheet. For the year ended December 31, 2010, the ineffective hedging portion of the changes in fair

values of the forward foreign exchange contracts of approximately RMB10 million was recognized as selling, general and

administrative expenses in the consolidated income statement.

The fair values of the forward foreign exchange contracts are estimated based on the discounted cash flows between the

contract forward rate and spot forward rate. The fair values of the interest rate swap contracts are estimated based on the

discounted cash flows between the contract floating rate and the contract fixed rate.

37. LONGTERM PAYABLE


Current liabilities – Deferred income of sale and leaseback 3,179 2,902 – Deferred payment for acquisition of interests in Minerva (i) 3,357 3,065

6,536 5,967 Non-current liabilities – Deferred income of sale and leaseback 7,946 10,156 – Deferred payment for acquisition of interests in Minerva (i) 12,991 12,244 – Others 7,980 3,980

28,917 26,380

Total 35,453 32,347

(i) The carrying value of the deferred payment for acquisition of interests in Minerva is based on cash flows

discounted using a rate of 7.5%.

(ii) Felix incurred the deferred income of sale and leaseback and deferred payment for acquisition of interests in

Minerva prior to its acquisition by the Group.



38. DEFERRED TAXATION

Temporary Fair value differences on Available- Accelerated adjustment on income and for-sale tax mining rights expenses Cash flow investment depreciation (coal reserves) recognized Tax losses hedge reserve Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2009 (19,317) (239,346) (37,961) 225,125 66,914 8,831 4,246Exchange re-alignment – – – (8,077) – – (8,077)Acquisition of Hua Ju Energy – – – 2,017 – – 2,017Acquisition of Felix – – (596,585) (929,508) 554,300 (1,318) (973,111)Charge to other comprehensive income (31,306) – – – – (11,780) (43,086)(Charge) Credit to the consolidated income statement(note 12) – (61,880) 1,513 378,493 (57,543) – 260,583

Balance at January 1, 2010 (50,623) (301,226) (633,033) (331,950) 563,671 (4,267) (757,428)Exchange re-alignment – (3,897) (40,040) (30,255) 53,752 – (20,440)Disposal of a joint venture and subsidiaries – – 2,229 (5,653) – – (3,424)Credit(Charge) to other comprehensive income 21,818 – – – – (24,350) (2,532)Credit(Charge) to the consolidated income statement(note 12) – (230) (32,738) (406,304) (253,945) – (693,217)

Balance at December 31, 2010 (28,805) (305,353) (703,582) (774,162) 363,478 (28,617) (1,477,041)

The temporary differences on income and expenses recognized mainly arose in respect of unpaid provision of salaries

and wages, provisions of compensation fees for mining rights and land subsidence, restoration, rehabilitation and

environmental costs and also included payments on certain expenses such as exploration costs and certain income in

Australia.

The following is the analysis of the deferred tax balances for financial reporting purposes:

2010 2009 RMB’000 RMB’000

Deferred tax assets 1,124,166 1,027,659Deferred tax liabilities (2,601,207) (1,785,087)

(1,477,041) (757,428)



38. DEFERRED TAXATION (continued)

At the balance sheet date, the Group has unused tax losses of RMB2,778 million (2009: RMB2,884 million) contributed

by the subsidiaries available for offset against future profits. A deferred tax asset has been recognized in respect of

RMB1,212 million (2009: RMB1,882 million) of such losses. No deferred tax asset has been recognized in respect of the

remaining RMB1,566 million (2009: RMB1,002 million) due to the unpredictability of future profit streams. Included

in unrecognized tax losses are losses of RMB106 million that will expire in 2012, losses of RMB 298 million that will

expire in 2013 and losses of RMB357 million that will expire in 2014 (2009: losses of RMB55 million that will expire in

2011, losses of RMB106 million that will expire in 2012, losses of RMB298 million that will expire in 2013 and losses of

RMB357 million that will expire in 2014). Other losses may be carried forward indefinitely.

By reference to financial budgets, management believes that there will be sufficient future profits for the realization of

deferred tax assets which have been recognized in respect of tax losses.

39. SHAREHOLDERS’ EQUITY

Share capital

The Company's share capital structure at the balance sheet date is as follows:

Foreign Domestic invested shares invested shares H shares State legal person (including H shares (held by the shares represented Parent Company) A shares by ADS) Total

Number of sharesAt January 1, 2009, January 1, 2010 and December 31, 2010 2,600,000,000 360,000,000 1,958,400,000 4,918,400,000

Foreign Domestic invested shares invested shares H shares State legal person (including H shares (held by the shares represented Parent Company) A shares by ADS) Total RMB’000 RMB’000 RMB’000 RMB’000

Registered, issued and fully paidAt January 1, 2009, January 1, 2010 and December 31, 2010 2,600,000 360,000 1,958,400 4,918,400

Each share has a par value of RMB1.



39. SHAREHOLDERS’ EQUITY (continued)

Share capital (continued)

The Company has completed the implementation of the share reform plan on April 3, 2006 and the non-tradable legal

person shares held by the Parent Company become tradable shares. The Parent Company guaranteed that it would not

trade these shares in the market within 48 months from that day. As part of the share reform plan, the Parent Company

agreed that the Group can participate in the investment and joint development in the oil production project of the

Parent Company. Up to the issue of these financial statements, there is no progress on the project development and

hence the shares held by the Parent Company are still not yet tradeable.

Reserves

Future Development Fund

Pursuant to regulation in the PRC, the Company, Shanxi Tianchi and Heze are required to transfer an annual amount to

a future development fund at RMB6 per tonne of raw coal mined. The fund can only be used for the future development

of the coal mining business and is not available for distribution to shareholders.

Shanxi Tianchi is required to transfer an additional amount at RMB5 per tonne of raw coal mined from 2008 onwards as

coal mine transformation fund.

Pursuant to the regulations of the Shandong Province Finance Bureau, State-owned Assets Supervision and

Administration Commission of Shandong Province and the Shandong Province Coal Mining Industrial Bureau, the

Company is required to transfer an additional amount at RMB5 per tonne of raw coal mined from July 1, 2004 to

the reform specific development fund for the future improvement of the mining facilities and is not distributable to

shareholders. No further transfer to the reform specific development fund is required from January 1, 2008.

In accordance with the regulations of the State Administration of Work Safety, the Company has a commitment to

incur RMB8 (Shanxi Tianchi: RMB15) for each tonne of raw coal mined from May 1, 2004 which will be used for

enhancement of safety production environment and improvement of facilities (“Work Safety Cost”). In prior years,

the work safety expenditures are recognized only when acquiring the fixed assets or incurring other work safety

expenditures. The Company, Heze and Shanxi Tianchi make appropriation to the future development fund in respect

of unutilized Work Safety Cost from 2008 onwards. In accordance with the regulations of the State Administration of

Work Safety, the Company’s subsidiaries, Hua Ju Energy and Yulin, have a commitment to incur Work Safety Cost at

the rate of: 4% of the sales income for the year below RMB10 million; 2% of the actual sales income for the year between

RMB10 million and RMB100 million(included); 0.5% of the actual sales income for the year between RMB100 million

and RMB1 billion(included); 0.2% of the actual sales income for the year above RMB1 billion. The unutilized Work

Safety Cost at December 31, 2010 was RMB431,779,000.



39. SHAREHOLDERS’ EQUITY (continued)

Reserves (continued)

Statutory Common Reserve Fund

The Company and its subsidiaries in the PRC have to set aside 10% of its profit for the statutory common reserve

fund(except where the fund has reached 50% of its registered capital). The statutory common reserve fund can be used

for the following purposes:

• to make good losses in previous years; or

• to convert into capital, provided such conversion is approved by a resolution at a shareholders’ general meeting

and the balance of the statutory common reserve fund does not fall below 25% of the registered capital.

Retained earnings

In accordance with the Company's Articles of Association, the profit for the purpose of appropriation will be deemed to

be the lesser of the amounts determined in accordance with(i) PRC accounting standards and regulations and(ii) IFRS

or the accounting standards of the places in which its shares are listed.

The Company can also create a discretionary reserve in accordance with its Articles of Association or pursuant to

resolutions which may be adopted at a meeting of shareholders.

The Company’s distributable reserve as at December 31, 2010 is the retained earnings computed under PRC GAAP

which amounted to approximately RMB19,727,074,000(At December 31, 2009: RMB15,062,956,000).



40. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while

maximising the return to shareholders through the optimisation of the debt and equity balance. The Group's overall

strategy remains unchanged from prior year.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 35 and equity

attributable to equity holders of the Company, comprising issued share capital, reserves and retained earnings, and

amounted to RMB60,347,644,000 (2009: RMB51,661,648,000) as at December 31, 2010.

The directors of the Company review the capital structure regularly. As part of this review, the directors of the Company

assess the annual budget prepared by the accounting and treasury department and consider and evaluate the cost

of capital and the risks associated with each class of capital. The Group will balance its capital structure through the

payment of dividends, issue of new shares and new debts or the repayment of existing debts.

41. FINANCIAL INSTRUMENT

41a. Categories of financial instruments


Financial assetsLoans and receivables(including cash and cash equivalents) 21,468,083 17,515,714Available-for-sale financial assets 224,442 295,295Derivative financial instruments (financial instruments at fair value) 239,476 37,760Financial liabilitiesAmortized cost 26,757,425 27,262,173Derivative financial instruments (financial instruments at fair value) 166,178 28,333

41b. Financial risk management objectives and policies

The Group’s major financial instruments include available-for-sale equity instrument, bills and accounts

receivable, other receivables, bank balances and cash, term deposits, restricted cash, derivative financial

instrument, bills and accounts payable, other payables, borrowings and amount due to Parent Company and

its subsidiary companies. Details of these financial instruments are disclosed in respective notes. The risks

associated with these financial instruments and the policies on how to mitigate these risks are set out below. The

management manages and monitors these exposures to ensure appropriate measures are implemented on a timely

and effective manner. There has been no significant change to the Group’s exposure to market risk or the manner

in which it manages and measures the risk.



41. FINANCIAL INSTRUMENT (continued)

41b. Financial risk management objectives and policies (continued)

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss

to the Group.

At December 31, 2010 and 2009, the Group’s maximum exposure to credit risk which will cause a financial loss

to the Group arising from the failure to perform their obligations in relation to each class of recognized financial

assets is the carrying amount of those assets as stated in the consolidated balance sheet.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for

determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action

is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade

debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In

this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The Group maintains its cash and cash equivalents with reputable banks. Therefore, the directors consider that the

credit risk for such is minimal.

The Group generally grants the customers with long-relationship credit terms not exceeding 180 days, depending

on the situations of the individual customers. For small to medium sized new customers, the Group generally

requires them to pay for the products before delivery.

Most of the Group’s domestic sales are sales to electric power plants, metallurgical companies, construction

material producers and railway companies. The Group generally has established long-term and stable

relationships with these companies. The Group also sells its coal to provincial and city fuel trading companies.

As the Group does not currently have direct export rights, all of its export sales must be made through National

Coal Corporation, Shanxi Coal Corporation or Minmetals Trading. The qualities, prices and final customer

destinations of the Group’s export sales are determined by the Group, National Coal Corporation, Shanxi Coal

Corporation or Minmetals Trading.

For the years ended December 31, 2010, 2009 and 2008, net sales to the Group’s five largest customers accounted

for approximately 24.7%, 28.7% and 32.8%, respectively, of the Group’s total net sales. Net sales to the Group’s

largest customer accounted for 13.0%, 15.4% and 17.7% of the Group’s net sales for the years ended December 31,

2010, 2009 and 2008, respectively. The Group’s largest customer was Huadian Power International Corporation

Limited(“Huadian”) for the years ended December 31, 2010, 2009 and 2008.





Credit risk (continued)

Details of the accounts receivable from the five customers with the largest receivable balances at December 31,

2010 and 2009 are as follows:

Percentage of accounts receivable At December 31, 2010 2009

Five largest receivable balances 58.43% 62.18%

The management considers the strong financial background and good creditability of these customers, and there is

no significant uncovered credit risk.

The table below shows the credit limit and balance of 5 major counterparties at the balance sheet date:

31.12.2010 31.12.2009Counterparty Location Credit limit Carrying amount Credit limit Carrying amount RMB’000 RMB’000 RMB’000 RMB’000 (note) (note)

Company A Australia Not applicable 64,170 Not applicable –Company B Korea Not applicable 59,133 Not applicable 51,235Company C Korea Not applicable 58,773 Not applicable 54,959Company D Australia Not applicable 53,450 Not applicable 81,329Company E Japan Not applicable 52,600 Not applicable –Company F The PRC Not applicable – Not applicable 43,592Company G The PRC Not applicable – Not applicable 41,615

288,126 272,730

Note: Customers in other countries of Australian subsidiaries have not been granted the credit limit. Australian subsidiaries

generally make annual sales arrangements with customers.

The Group’s geographical concentration of credit risk is mainly in East Asia (excluding the PRC) and Australia. As

at December 31, 2010 and 2009, over 85% and 91% of the Group’s total trade receivables were from Australia and

from East Asia(excluding the PRC) respectively.





Market risk

(i) Currency risk

The Group’s sales are denominated mainly in the functional currency of the relevant group entity making

the sale, whilst costs are mainly denominated in the group entity’s functional currency. Accordingly, there is

no significant exposure to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary

liabilities in currencies other than the functional currencies of the relevant group entities at the balance sheet

date are as follows:

Liabilities Assets 2010 2009 2010 2009 RMB’000 RMB’000 RMB’000 RMB’000

United States Dollar (“USD”) 20,516,314 20,757,943 902,402 1,311,500Euro (“EUR”) – – 222 3,611Hong Kong Dollar (“HKD”) – – 6,062 7,309Notional amounts of sell USD foreign exchange contracts used for hedging – – 4,169,000 1,143,416Notional amounts of buy USD foreign exchange contracts used for hedging 79,000 73,713 – –Notional amounts of buy EUR foreign exchange contracts used for hedging – 26,541 – –Notional amounts of buy Yen foreign exchange contracts used for hedging 9,000 71,511 – –

The sales of the Group’s subsidiaries in Australia are mainly export sales and some of their fixed assets

are imported from overseas. Their foreign exchange hedging policy is disclosed in note 36. The Group’s

operations in the PRC do not adopt any foreign exchange hedging policy.





Market risk (continued)

(i) Currency risk (continued)

Sensitivity analysis

The Group is mainly exposed to the fluctuation against the currency of United States Dollar and Hong Kong

Dollar.

The following table details the Group's sensitivity to a 5% increase and decrease in RMB against relevant

foreign currencies. 5% represents management's assessment of reasonably possible changes in foreign

exchange rates over the period until the next annual balance sheet date. The sensitivity analysis includes

only outstanding foreign currency denominated monetary items and adjusts their translation at the year end

for a 5% change in foreign currency rates and also assumes all other risk variables remained constant. The

sensitivity analysis includes loans to foreign operations within the Group where the denomination of the

loan is in a currency other than the functional currency of the lender or the borrower.

USD Impact (note i) HKD Impact (note i) 2010 2009 2010 2009 RMB’000 RMB’000 RMB’000 RMB’000

Increase(Decrease) to profit and loss – if RMB weakens against respective foreign currency 35,312 49,390 227 274 – if RMB strengthens against respective foreign currency (35,312) (49,390) (227) (274)

USD Impact (note ii) 2010 2009 RMB’000 RMB’000

Increase(Decrease) to profit and loss – if AUD weakens against respective foreign currency (718,045) (739,749) – if AUD strengthens against respective foreign currency 718,045 739,749

Increase(Decrease) to shareholders’ equity – if AUD weakens against respective foreign currency (725,998) (740,615) – if AUD strengthens against respective foreign currency 725,998 740,615






(i) Currency risk (continued)

Notes:

(i) This is mainly attributable to the exposure outstanding on the bank deposit and loans to foreign operations within

the Group of USD and HKD at year end in the Group.

(ii) This is mainly attributable to the exposure outstanding on the loans to foreign operations within the Group,

foreign currency bank borrowings and derivative financial instruments where the denomination of the loan is in a

currency other than the functional currency of the borrower (i.e. AUD).

In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as

the year end exposure does not reflect the exposure during the year.

(ii) Interest rate risk

The Group is exposed to cash flow interest rate risk in relation to variable-rate bank balances, term deposits,

restricted cash (see note 17 for details of these bank balances) and bank borrowings (see note 35 for details of

these borrowings).

The interest rate hedging policy of the Group is disclosed in note 36.

The Group’s exposures to interest rate risk on financial assets and financial liabilities are detailed in the

liquidity risk section of this note. The Group's cash flow interest rate risk is mainly concentrated on the

fluctuation of the PBOC arising from the Group's RMB borrowings, the LIBOR arising from the Group’s

USD borrowings and the Australian BBSY arising from the Group’s AUD borrowings.






(ii) Interest rate risk (continued)

Sensitivity Analysis

The following table details the Group’s sensitivity to a change of 100 basis points in the interest rate,

assuming the financial instruments outstanding at the end of the reporting period were outstanding for

the whole year and all the variables were held constant. It includes the interest rate fluctuation of the

abovementioned PBOC rate, LIBOR and Australian BBSY rate.

2010 2009 RMB’000 RMB’000

Increase(Decrease) to profit and loss – If increases by 100 basis points (71,946) (61,818) – If decreases by 100 basis points 71,946 61,818

Increase(Decrease) to shareholders’ equity – If increases by 100 basis points (34,692) (61,818) – If decreases by 100 basis points 34,692 61,818

(iii) Other price risk

In addition to the above risks relating to financial instruments, the Group is exposed to equity price risk

through investment in listed equity securities and also to price risk in non financial instruments such as

steel and metals(the Group’s major raw materials). The Group currently does not have any arrangement to

hedge the price risk exposure of its investment in equity securities and its purchase of raw materials. The

Group’s exposure to equity price risk through investment in listed equity securities and also the result of the

sensitivity analysis is not significant.





Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents

deemed adequate by the management to finance the Group's operations and mitigate the effects of fluctuations

in cash flows. The management monitors the utilization of bank borrowings and ensures compliance with loan

covenants.

The following table details the Group's remaining contractual maturity for its financial liabilities. For non-

derivative financial liabilities, the table has been drawn up based on the undiscounted cash flows of financial

liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest

and principal cash flows.

Liquidity and interest risk tables

Weighted average Total Carrying effective Less than 6 months undiscounted amount at interest rate 3 months 3-6 months to 1 year 1-5 years 5+ years cash flow 12.31 % RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

2010Non-derivative financial liabilitiesBills and accounts payables N/A 1,539,098 15,346 – – – 1,554,444 1,554,444Other payables N/A 1,732,092 – – – – 1,732,092 1,732,092Amount due to Parent Company and its subsidiary companies N/A 438,783 – – – 438,783 438,783Finance leases 6.9%-12.47% 38,185 38,185 76,370 898,025 – 1,050,765 822,004Bank borrowings – variable rate 1.05%-7.6% 144,597 449,854 284,383 22,674,270 50,722 23,603,826 22,193,754 Long-term payable N/A 1,626 – 1,576 10,968 2,337 16,507 16,348

3,894,381 503,385 362,329 23,583,263 53,059 28,396,417 26,757,425

Financial guarantees issuedMaximum amount guaranteed (note) N/A – – – – 532,607 532,607 –

Derivative financial instruments – gross settlementForward foreign exchange contracts – Outflow N/A 14,747 41,098 32,155 – – 88,000 88,000

Derivative financial instruments – net settlementInterest rate swap contracts N/A 38,297 37,103 67,529 10,980 – 153,909 153,909





Liquidity risk (Continued)

Weighted average Total Carrying effective Less than 6 months undiscounted amount at interest rate 3 months 3-6 months to 1 year 1-5 years 5+ years cash flow 12.31 % RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

2009Non-derivative financial liabilitiesBills and accounts payables N/A 1,306,265 60,711 – – – 1,366,976 1,366,976Other payables N/A 2,612,165 – – – – 2,612,165 2,612,165 Amount due to Parent Company and its subsidiary companies N/A 757,882 – – – – 757,882 757,882Finance Leases 6.9%-12.47% 656,703 – – – – 656,703 656,703Bank borrowings – variable rate 4.02%-7.6% 919,410 11,254 11,588 24,930,041 92,394 25,964,687 21,853,138 Long-term payable N/A 1,532 – 1,532 15,324 3,065 21,453 15,309

6,253,957 71,965 13,120 24,945,365 95,459 31,379,866 27,262,173

Financial guarantees issuedMaximum amount guaranteed (note) N/A – – – – 286,181 286,181 –

Derivative financial instruments – gross settlementForward foreign exchange contracts – Outflow N/A 100,254 71,511 – – – 171,765 171,765

Derivative financial instruments – net settlementInterest rate swap contracts N/A 4,353 – – – – 4,353 4,353

Note: the amount presented is the maximum contractual presented under guarantees issued.

41c. Fair values

The fair value of available-for-sales investment is determined with reference to quoted market price. The fair

values of the forward foreign exchange contracts are estimated based on the discounted cash flows between the

contract forward rate and spot forward rate. The fair values of interest rate swap contracts are estimated based

on the discounted cash flows between the contract floating rate and contract fixed rate. The fair value of other

financial assets and financial liabilities are determined in accordance with generally accepted pricing models based

on discounted cash flow analysis.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortized

cost in the consolidated financial statements approximate their fair values.

Fair values of financial assets and financial liabilities are determined as follows:




41c. Fair values (continued)

The following table presents the carrying value of financial instruments measured at fair value across the three

levels of the fair value hierarchy defined in IFRS 7(Amendment). The levels of fair value are defined as follows:

Level 1: fair value measurements are those derived from quoted prices(unadjusted) in active markets for identical

assets and liabilities;

Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level

1 that are observable for the asset or liability either directly(i.e. as prices) or indirectly(i.e. derived from

prices); and

Level 3: fair value measurements are those derived from valuation techniques that include inputs for the assets or

liability that are not based on observable market data(unobservable inputs).

At December 31 Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

2010AssetsAvailable-for-sale investments – Investments in securities listed on the SSE 194,258 – – 194,258 Derivative financial instruments – Forward foreign exchange contracts – 239,476 – 239,476

194,258 239,476 – 433,734

LiabilitiesDerivative financial instruments – Forward foreign exchange contracts – 12,269 – 12,269 – Interest rate swap contracts – 153,909 – 153,909

– 166,178 – 166,178

2009AssetsAvailable-for-sale investments – Investments in securities listed on the SSE 264,672 – – 264,672Derivative financial instruments – Forward foreign exchange contracts – 37,760 – 37,760

264,672 37,760 – 302,432

LiabilitiesDerivative financial instruments – Forward foreign exchange contracts – 23,980 – 23,980 – Interest rate swap contracts – 4,353 – 4,353

– 28,333 – 28,333

There were no transfers between Levels 1 and 2 during the year ended December 31, 2010 and 2009.



42. ACQUISITION OF HUA JU ENERGY

On October 24, 2008, the Company entered into an acquisition agreement with the Parent Company to acquire 74%

equity interest in Hua Ju Energy. On February 18, 2009, the acquisition was completed and the consideration of

RMB593,243,000 was fully paid to the Parent Company to acquire 74% equity interest of Hua Ju Energy. The net assets

acquired were included in the methanol, electricity and heat supply segment.

In July 2009, the Company paid RMB173,007,000 to three former shareholders of Hua Ju Energy to acquire additional

21.14% equity interest in Hua Ju Energy which gives rise to goodwill of RMB38,187,000.

This acquisition has been accounted for using the purchase method.

The net assets of Hua Ju Energy acquired, and the goodwill arising, are as follows:

Fair value RMB’000

Bank balances and cash 4,567Bills and accounts receivable 2,129Inventories 3,611Prepayments and other receivables 79,563Other currents assets 25,246Property, plant and equipment 755,213Prepaid lease payment 74,652Available-for-sale financial assets 30,182Deferred tax assets 2,017Accounts payable (64,760)Customers’ deposits and other payables (263,297)Other current liabilities (120,000)

Net assets acquired 529,123Non-controlling interests (137,572)Goodwill arising on acquisition 201,692

593,243

Total consideration satisfied by:Cash consideration paid on acquisition 593,243

Net cash outflow arising on acquisition:Cash paid on acquisition (593,243)Bank balances and cash acquired 4,567

(588,676)

There is no significant difference between the carrying value and the fair value of net assets of Hua Ju Energy.



42. ACQUISITION OF HUA JU ENERGY (continued)

Goodwill arising from acquisition of Hua Ju Energy is mainly because this acquisition can establish an electricity

management platform for the Group and is beneficial to the future development of coal resources of the Group. It also

ensures stable supply of electricity to the Group, reduce operating costs, and enhance profitability and operating results.

It further ensures environmental disposal of waste products such as coal gangue produced from the Group’s mining

operations.

During the period from the acquisition date/the beginning period date to December 31, 2009, this transaction does not

have any material impact on the revenue and operating results of the Group.

43. ACQUISITION OF FELIX

On 13 August 2009, the Company entered into a binding scheme implementation agreement with Felix to acquire 100%

equity interest in Felix. On December 23, 2009, the acquisition was completed and the Company paid the consideration

of AUD3,333 million to all the shareholders of Felix. On December 30, 2009, Felix was delisted from the Australian

Securities Exchange and all legal procedures of acquiring all of the Felix shares have been completed. The net assets

acquired were included in the coal mining segment.

This acquisition has been accounted for using the purchase method.



43. ACQUISITION OF FELIX (continued)

The net assets of Felix acquired, and the goodwill arising, are as follows:

Carrying Fair value

amounts adjustments Fair values

RMB’000 RMB’000 RMB’000

Bank balances and cash 872,435 – 872,435Term deposits 91,941 – 91,941Bills and accounts receivable 292,008 – 292,008Inventories 306,444 (39,349) 267,095Prepayments and other receivables 214,501 – 214,501Derivative financial instrument assets 27,928 – 27,928Tax recoverable 46,777 – 46,777Other currents assets 350,676 – 350,676Property, plant and equipment, net 2,842,046 704,861 3,546,907Available-for-sale financial assets 1 – 1Interests in jointly controlled entities 1,257 – 1,257Intangible assets 1,312,393 16,535,630 17,848,023Accounts payable (390,927) – (390,927)Receipts in advance and other payables (700,833) – (700,833)Borrowings (1,573,956) – (1,573,956)Derivative financial instrument liabilities (28,333) – (28,333)Deferred taxation (376,526) (596,585) (973,111)Provision for land subsidence, restoration, rehabilitation and environmental costs (48,170) – (48,170)Other long-term payables (28,367) – (28,367)

Net assets acquired 19,815,852Non-controlling interests (23,542)Goodwill arising on acquisition 766,816

20,559,126

Total consideration satisfied by:Cash consideration paid on acquisition 20,428,030Direct acquisition costs paid 2,949Direct acquisition costs not yet settled 128,147

20,559,126

Net cash outflow arising on acquisition:Cash paid on acquisition (20,430,979)Bank balances and cash acquired 872,435

(19,558,544)

During the period from the acquisition date to December 31, 2009, Felix did not have any material impact on the

revenue and operating results the Group.



43. ACQUISITION OF FELIX (continued)

If the acquisition had been completed on January 1, 2009, the Group's revenue for the year would have been RMB23,894

million, and the Group's profit for the year would have been RMB4,914 million. The pro forma information is for

illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that

actually would have been achieved had the acquisition been completed on January 1, 2009, nor is it intended to be a

projection of future results.

The goodwill arising from the acquisition is attributable to the extension of coal reserves and diversification of

operations by the Group, and operational synergies and strategic benefits.

44. ACQUISITION OF THREE SUBSIDIARIES

In 2009, the Group signed a co-operation agreement with an independent third party for the acquisition of 100% equity

of Yize. The acquisition was completed on April 30, 2010 with a consideration of RMB179.7 million being paid to the

shareholders of Yize.

During the year, the Group has also completed the acquisition of 100% equity of Inner Mongolia Rongxin Chemical

Co., Ltd (“Rongxin Chemicals”) and Inner Mongolia Daxin Industrial Gas Co., Ltd (“Daxin Industrial”) with cash

consideration of RMB4.4 million and RMB6 million respectively.

Yize, Rongxin Chemicals and Daxin Industrial have not engaged in any operating activities at the acquisition date and

the acquisitions were reflected as purchases of assets and liabilities of which no goodwill was recognized.

Net book values of the acquired net assets at acquisition dates are as follow:

Carrying amounts RMB’000

Inventories 7Prepayments and other receivables 15,600Property, plant and equipment, net 4,751Prepaid lease payments 55,418Intangible assets 131,985Other payables (17,666)

Net assets acquired 190,095

Considerations:Cash paid on acquisition 133,000Deposit paid for acquisition of investment in prior year 57,095

190,095

Net cash outflow arising on acquisition (133,000)



45. DISPOSAL OF A JOINT VENTURE

As at December 31, 2010, the Group disposed of its 51% interest in Minerva joint venture to an independent third party

at a consideration of AUD191,860,000 (RMB1,235,840,000).

Net assets of joint venture dispose of are as follows:

Carrying amounts RMB’000

Total assets 1,401,548Total liabilities (283,636)

1,117,912Gain on disposal of a joint venture 117,928

Total consideration 1,235,840

Cash inflow(outflow) of the disposalCash consideration 1,235,840Disposal of cash and bank balance (88,019)

Net cash inflow from the disposal of Minerva 1,147,821

During the year, the Group has also disposed of its interests in Minerva Mining Pty Ltd, Minerva Coal Pty Ltd and Felix

Coal Sales Pty Ltd, subsidiaries related to the operations of Minerva joint venture. The subsidiaries are not material to

the Group and their assets, liabilities and related profit or loss on disposal have been included in the above disposal of a

joint venture.



46. RELATED PARTY BALANCES AND TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated

on consolidation and are not disclosed. Details of balances and transactions between the Group and other related parties

are disclosed below.

Related party balances

The amounts due to the Parent Company and its subsidiary companies are non-interest bearing and unsecured.

The amounts due to the Parent Company and its subsidiary companies as at December 31, 2010 and 2009 included the

present value of the outstanding balance that arose from the funding of the acquisition of the mining rights of Jining III

as of January 1, 2001 discounted using the market rate of bank borrowings.

The consideration for the cost of the mining rights of approximately RMB132,479,000 is to be settled over the 10 years,

commencing from 2001.

Except the amounts disclosed above, the amount due to the Parent Company and/or its subsidiary companies are

repayable on demand.



46. RELATED PARTY BALANCES AND TRANSACTIONS (continued)

Related party transactions

During the years, the Group had the following significant transactions with the Parent Company and/or its subsidiary

companies:


Income Sales of coal 2,672,424 2,086,542 1,384,415 Sales of auxiliary materials 454,254 317,479 550,986 Sales of heat and electricity 235,002 204,061 –

Expenditure Utilities and facilities 34,006 39,069 376,288 Annual fee for mining rights – – – Purchases of supply materials and equipment 421,606 598,498 471,768 Repair and maintenance services 262,478 388,917 253,864 Social welfare and support services 794,621 769,561 255,265 Technical support and training 26,000 26,000 20,000 Road transportation services 64,945 79,560 86,671 Construction services 655,311 242,593 294,938

Certain expenditure for social welfare and support services (excluding medical and child care expenses) of

RMB259,575,000, RMB165,900,000 and RMB165,900,000 for the years ended December 31, 2010, 2009 and 2008,

respectively, and for technical support and training of RMB26,000,000, RMB26,000,000 and RMB20,000,000, have been

charged by the Parent Company at a new negotiated amount per annum, subject to changes every year.

During the year ended December 31, 2008, the Company acquired Zhaolou coal mine from the Parent Company.

During the year ended December 31, 2009, the Company acquired 74% equity interest in Hua Ju Energy from the Parent

Company. Details of this acquisition are set out in note 42.

In addition to the above, the Company participates in a retirement benefit scheme of the Parent Company in respect of

retirement benefits (note 48).




Transactions/balances with other state-controlled entities in the PRC

The Group operates in an economic environment currently predominated by entities directly or indirectly owned or

controlled by the PRC government (“state-controlled entities”). In addition, the Group itself is part of a larger group of

companies under the Parent Company which is controlled by the PRC government. Apart from the transactions with

the Parent Company and its subsidiaries disclosed above, the Group also conducts business with other state-controlled

entities. The directors consider those state-controlled entities are independent third parties so far as the Group’s

business transactions with them are concerned.

Material transactions with other state-controlled entities are as follows:


Trade sales 9,823,814 6,970,855 10,253,998Trade purchases 1,581,427 1,191,783 1,328,958

Material balances with other state-controlled entities are as follows:


Amounts due to other state-controlled entities 443,403 359,726Amounts due from other state-controlled entities 1,320,801 1,101,535

Amounts due to and from state-controlled entities are trade nature of which terms are not different from other

customers (notes 18 and 32).

In addition, the Group has entered into various transactions, including deposits placements, borrowings and other

general banking facilities, with certain banks and financial institutions which are state-controlled entities in its ordinary

course of business. In view of the nature of those banking transactions, the directors are of the opinion that separate

disclosure would not be meaningful.

Except as disclosed above, the directors are of the opinion that transactions with other state-controlled entities are not

significant to the Group’s operations.




Balances and transactions with jointly controlled entities

Due from a jointly controlled entity:


Due from a jointly controlled entity (note 20) 115,480 66,321

The amount due from a jointly controlled entity is unsecured and interest-free.

As at December 31, 2010, the trade balances between the Group and a jointly controlled entity are disclosed in notes 18

and 32. The jointly controlled entity was obtained through the acquisition of Felix. During the year, sales to the jointly

controlled entity by the Group’s Australian subsidiaries amounted to RMB 1,202,255,000 (2009: nil).

Compensation of key management personnel

The remuneration of directors and other members of key management were as follows:


Directors’ fee 452 436 426Salaries, allowance and other benefits in kind 4,548 3,292 2,545Retirement benefit scheme contributions 778 550 407

5,778 4,278 3,378

The remuneration of directors and key executives is determined by the remuneration committee having regard to the

performance of individuals and market trends.



47. COMMITMENTS


Capital expenditure contracted for but not provided in the consolidated financial statements Acquisition of property, plant and equipment – the Group 814,800 5,308 – share of joint ventures 207,111 708,573Exploration and evaluation expenditure – share of joint ventures – 2,315

1,021,911 716,196

Capital expenditure authorized but not contracted for Acquisition of property, plant and equipment – the Group – 142,565

During 2006, the Company entered into a co-operative agreement with two independent third parties to establish a

company for acquiring a coal mine in Shaanxi province for operations. In addition to the deposit referred to in note 29,

the Company is committed to invest a further RMB78.8 million as at December 31, 2010 and 2009.

Pursuant to the regulations issued by the Shandong Province Finance Bureau, the Group has to pay a deposit

of RMB1,980 million (2009: RMB1,980 million) to the relevant government authority, which secured for the

environmental protection work done by the Company. As at December 31, 2010, deposit of RMB222 million (2009:

RMB212 million) were made and the Company is committed to further make security deposit of RMB1,758 million.

(2009: RMB1,768 million)

During 2007, the Company entered into an agreement with the Parent Company and China Credit Trust Co., Ltd. to

establish a company, named of Yankuang Group Finance Company Limited. In November 2009, the Company has

received the approval from China Banking Regulatory Commission. The Company shall contribute RMB125 million

from internal resources, which would account for 25% of the equity interest in the Investee. On April 20, 2010, all the

investors signed a formal joint venture establishment agreement. Details of the establishment are set out in note 28.

Compensation fees for mining rights are required to be pay annually and details are set out in note 23.

In 2009, the Company entered into agreements with third parties to acquire three subsidiary companies. The Company

has made deposits of RMB 57 million in 2009 and the Group paid additional consideration of RMB133 million during

the year. The acquisitions were completed during the year and details of the acquisitions are set out in note 44.

On October 27, 2009, the board of directors of the Company passed a resolution for additional investment in Yanmei

Heze Neng Hua Co., Ltd of RMB1.5 billion by internal funding and thereby increasing its registered capital from

RMB1.5 billion to RMB3 billion. The percentage of equity interest held by the Company increased from 96.67% to

98.33% and this capital increase was completed in March 2010.

As at December 31, 2010, the Company’s board of directors approved the acquisition of 30% equity interest in Ashton

joint venture at a consideration of USD250 million. Up to the date of these financial statements, the acquisition has not

yet been completed.



48. RETIREMENT BENEFITS

Qualifying employees of the Company are entitled to a pension, medical and other welfare benefits. The Company

participates in a scheme of the Parent Company and pays a monthly contribution to the Parent Company in respect

of retirement benefits at an agreed contribution rate based on the monthly basic salaries and wages of the qualified

employees. The Parent Company is responsible for the payment of all retirement benefits to the retired employees of the

Company.

Pursuant to the Provision of Insurance Fund Administrative Services Agreement entered into by the Company and the

Parent Company on November 7, 2008, the monthly contribution rate is set at 20% (2009: 20%; 2008: 45%) of the total

monthly basic salaries and wages of the Company’s employees for the period from January 1, 2009 to December 31,

2011. Retirement pension and other welfare benefits will be provided by the Parent Company on the actual cost basis,

which will be reimbursed by the Company after the actual payment made by the Parent Company (included in 45%

contribution rate in pension scheme for the years ended December 31, 2008).

The amount of contributions paid to the Parent Company were RMB640,933,000, RMB520,273,000 and

RMB759,356,000 for the years ended December 31, 2010, 2009, and 2008, respectively.

The Company's subsidiaries are participants in a state-managed retirement scheme pursuant to which the subsidiaries

pay a fixed percentage of its qualifying staff's wages as a contribution to the scheme. The subsidiaries' financial

obligations under this scheme are limited to the payment of the employer's contribution. During the year, contributions

paid and payable by the subsidiaries pursuant to this arrangement were insignificant to the Group. The Group’s overseas

subsidiaries pay fixed contribution as pensions under the laws and regulations of the relevant countries.

During the year and at the balance sheet date, there were no forfeited contributions which arose upon employees leaving

the above schemes available to reduce the contributions payable in future years.

49. HOUSING SCHEME

The Parent Company is responsible for providing accommodation to its employees and the domestic employees of the

Company. The Company and the Parent Company share the incidental expenses relating to the accommodation at a

negotiated amount for each of the three years ended December 31, 2010, 2009 and 2008. Such expenses, amounting to

RMB140,000,000, RMB140,000,000 and RMB86,200,000 for each of the three years ended December 31, 2010, 2009 and

2008 respectively, have been included as part of the social welfare and support services expenses summarized in note 48.

The Company currently makes a fixed monthly contribution for each of its qualifying employees to a housing fund

which is equally matched by a contribution from the employees. The contributions are paid to the Parent Company

which utilizes the funds, along with the proceeds from the sales of accommodation and, if the need arises, from loans

arranged by the Parent Company, to construct new accommodation.



50. MAJOR NONCASH TRANSACTION

During the year ended December 31, 2010, the Group acquired certain property, plant and equipment, of which

RMB324,136,000 (2009: RMB606,227,000) have not yet been paid.

During the year ended December 31, 2010, the Group acquired certain property, plant and equipment at cost of

RMB261,556,000 under finance leases.

51. POST BALANCE SHEET EVENT

On January 24, 2011, the Company, the Parent Company, and Shaanxi Yanchang Petroleum (Group) Corp. Ltd.

(“Yanchang Petroleum”) entered into an agreement for the formation of Shaanxi Future Energy Chemical Corp. Ltd.

Upon completion of the agreement, the Parent Company, the Company and Yanchang Petroleum will contribute

RMB2.7 billion, RMB1.35 billion and RMB1.35 billion as capital contribution and will hold 50%, 25% and 25% equity

interest in the investee company respectively.

On January 17, 2011, the Company’s board of directors approved to increase the registered capital of Ordos by RMB2.6

billion with its internal resources. The registered capital of Ordos will therefore increase from RMB500 million to

RMB3.1 billion. Up to the date of these financial statements, the relevant procedures are still in progress.

On January 28, 2011, the Company’s board of directors approved Ordos to participate in the public auction of the

mining rights of Zhuan Longwan coal mine zone. Ordos was successful in the bidding at a consideration of RMB7.8

billion and entered into a confirmation agreement with the relevant government authority of the Inner Mongolia

Autonomous Region.



52. CONTINGENT LIABILITIES


Guarantees

(a) The Group

Guarantees secured over deposits 43,970 4,294Performance guarantees provided to external parties 248,763 197,466Guarantees provided in respect of the cost of restoration of certain mining leases, given to government departments as required by statute 201,167 41,334

(b) Joint ventures

Guarantees secured over deposits 504 460Performance guarantees provided to external parties 463 423Guarantees provided in respect of the cost of restoration of certain mining leases, given to government departments as required by statute 37,740 42,204

532,607 286,181

53. OPERATING LEASE COMMITMENTS


Within one year 6,043 27,765More than one year, but not more than five years 4,922 205,155

10,965 232,920

Operating leases have average remaining lease terms of 1 to 5 years. Items that are subject to operating leases include

mining equipment, office space and small items of office equipment.



54. INFORMATION OF THE COMPANY

The Company’s balance sheet is disclosed as follows:


ASSETS

CURRENT ASSETSBank balances and cash 5,336,181 6,724,044Term deposits 2,567,722 3,216,697Restricted cash 40,037 305,205Bills and accounts receivable 9,605,790 4,315,279Inventories 741,057 394,989Loans to subsidiaries 1,013,787 670,000Prepayments and other receivables 2,853,765 1,727,823Prepaid lease payments 13,334 13,334

TOTAL CURRENT ASSETS 22,171,673 17,367,371

NON-CURRENT ASSETSCoal reserves 69,316 72,863Prepaid lease payments 508,179 521,567Property, plant and equipment 7,142,055 7,072,073Goodwill 107,346 107,346Investment in subsidiaries (note a) 6,792,254 5,292,254Investments in securities 194,258 265,112Investments in associates 1,025,000 900,000Loan to subsidiaries 2,670,000 4,073,313Deposit made on investment 2,163,679 117,926Deferred tax asset 632,323 285,170

TOTAL NON-CURRENT ASSETS 21,304,410 18,707,624

TOTAL ASSETS 43,476,083 36,074,995

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIESDerivative financial instruments 150,649 –Bills and accounts payable 948,484 786,760Other payables and accrued expenses 3,293,705 2,706,419Provision for land subsidence, restoration, rehabilitation and environmental costs 2,238,203 1,560,638Amounts due to Parent Company and its subsidiary companies 209,051 418,483Taxes payable 1,230,878 634,664

TOTAL CURRENT LIABILITIES 8,070,970 6,106,964

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY (note b) 35,405,113 29,968,031

TOTAL LIABILITIES AND EQUITY 43,476,083 36,074,995



54. INFORMATION OF THE COMPANY (continued)

(a) Details of the Company’s major subsidiaries at December 31, 2010 and 2009 are as follows:

Name of subsidiary

Country of

incorporation/

registration and

operation

Issued and fully paid

capital/registered

capital

Proportion of registered capital/issued share

capital held by the Company

Proportion of voting

power held Principal activities

2010 2009 2010 2009Directly Indirectly Directly Indirectly

Austar Coal Mine Pty Limited

(“Austar”)

Australia AUD64,000,000 – 100% – 100% 100% 100% Coal mining

business in

Australia

Yanmei Heze Neng Hua Company

Limited (“Heze”) (note 1)

PRC RMB3,000,000,000 98.33% – 96.67% – 98.33% 96.67% Coal mining

business

Yancoal Australia Pty, Limited

(“Yancoal Australia”)

Australia AUD64,000,000 100% – 100% – 100% 100% Investment holding

Shandong Yanmei Shipping Co.,

Ltd. (“Yanmei Shipping”)

(note 1)

PRC RMB5,500,000 92% – 92% – 92% 92% Transportation via

rivers and lakes

and the sales of

coal and

construction

materials

Yulin (note 1) PRC RMB1,400,000,000 100% – 100% – 100% 100% Methanol and

electricity power

business

Zhongyan Trade Co., Ltd

(“Zhongyan”) (note 1)

PRC RMB2,100,000 52.38% – 52.38% – 52.38% 52.38% Trading and

processing of

mining machinery

Shanxi Neng Hua (note 1) PRC RMB600,000,000 100% – 100% – 100% 100% Investment holding

Shanxi Tianchi (note 1) PRC RMB90,000,000 – 81.31% – 81.31% 81.31% 81.31% Coal mining

business

Shanxi Tianhao (note 1) PRC RMB150,000,000 – 99.89% – 99.85% 99.89% 99.85% Methanol and

electricity power

business

Hua Ju Energy (note 1) PRC RMB288,589,774 95.14% – 95.14% – 95.14% 95.14% Electricity and heat

supply

Ordos (note 1) PRC RMB500,000,000 100% – 100% – 100% 100% Development of

methanol project

Yize (note 1) PRC RMB136,260,500 – 100% – – 100% – Development of

methanol project

Rongxin Chemical (note 1) PRC RMB3,000,000 – 100% – – 100% – Development of

methanol project

Daxin Industrial (note 1) PRC RMB 4,107,432 – 100% – – 100% – Development of

methanol project




(a) (continued)

Name of subsidiary

Country of

incorporation/

registration and

operation

Issued and fully paid

capital/registered

capital

Proportion of registered capital/issued share

capital held by the Company

Proportion of voting

power held Principal activities

2010 2009 2010 2009Directly Indirectly Directly Indirectly

Felix Australia AUD446,409,065 – 100% – 100% 100% 100% Coal mining

business in

Australia

Ashton Coal Operations

Pty Limited

Australia AUD 5 – 100% – 100% 100% 100% Management of coal

operations

Athena Coal Pty Ltd Australia AUD 2 – 100% – 100% 100% 100% Coal exploration

Felix NSW Pty Ltd Australia AUD 2 – 100% – 100% 100% 100% Investment holding

Minerva Mining Pty Ltd (note 2) Australia AUD 2 – – – 100% – 100% Management of

coal operations

Felix Coal Sales Pty Ltd (note2) Australia AUD 1 – – – 100% – 100% Coal sales

Minerva Coal Pty Ltd (note 2) Australia AUD 1,000 – – – 51% – 51% Real estate holder

Moolarben Coal Mines

Pty Limited

Australia AUD 1 – 100% – 100% 100% 100% Coal business

development

Moolarben Coal Operations

Pty Ltd

Australia AUD 2 – 100% – 100% 100% 100% Management of

coal operations

Moolarben Coal Sales Pty Ltd Australia AUD 2 – 100% – 100% 100% 100% Coal sales

Proserpina Coal Pty Ltd Australia AUD 1 – 100% – 100% 100% 100% Coal mining

and sales

Tonford Pty Ltd Australia AUD 2 – 100% – 100% 100% 100% Coal exploration

UCC Energy Pty Limited Australia AUD 2 – 100% – 100% 100% 100% Ultra clean

coal technology

White Mining (NSW)

Pty Limited

Australia AUD 10 – 100% – 100% 100% 100% Coal mining

and sales

White Mining Research

Pty Ltd

Australia AUD 2 – 100% – 100% 100% 100% No business in

Australia, to

be liquidated

White Mining Services

Pty Limited

Australia AUD 2 – 100% – 100% 100% 100% No business in

Australia, to

be liquidated

White Mining Limited Australia Ordinary shares

AUD 3,300,000

A Shares AUD 200

– 100% – 100% 100% 100% Investment holding

Yarrabee Coal Company

Pty Ltd

Australia AUD 92,080 – 100% – 100% 100% 100% Coal mining

and sales




(a) (continued)

Unless otherwise specified, the capital of the above subsidiaries are registered capital (those established in the

PRC) or ordinary shares (those established in other countries).

Note 1: Yanmei Shipping, Yulin, Zhongyan, Heze, Shanxi Neng Hua, Shanxi Tianchi, Shanxi Tianhao, Hua Ju Energy, Ordos,

Yize, Rongxin Chemical and Daxin Industrial are established in the PRC as limited liability companies.

Note 2: Minerva Mining Pty Ltd, Minerva Coal Pty and Felix Coal Sales Pty Ltd were disposed of together with the disposal of

Minerva joint venture.

(b) The Company's equity is as follows:

Future Statutory Investment Share development common revaluation Retained Share capital premium fund reserve fund reserve earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2009 4,918,400 2,981,002 2,934,917 2,823,175 57,949 13,815,477 27,530,920Profit for the year – – – – – 4,310,552 4,310,552Fair value changes of available- for-sale investment – – – – 93,919 – 93,919Appropriations to reserves – – 299,400 381,280 – (680,680) –Dividends – – – – – (1,967,360) (1,967,360)

Balance at December 31, 2009 4,918,400 2,981,002 3,234,317 3,204,455 151,868 15,477,989 29,968,031

Balance at January 1, 2010 4,918,400 2,981,002 3,234,317 3,204,455 151,868 15,477,989 29,968,031Profit for the year – – – – – 6,732,134 6,732,134Fair value changes of available- for-sale investment – – – – (65,452) – (65,452)Appropriations to reserves – – 366,900 654,858 – (1,021,758) –Dividends – – – – – (1,229,600) (1,229,600)

Balance at December 31, 2010 4,918,400 2,981,002 3,601,217 3,859,313 86,416 19,958,765 35,405,113



SUPPLEMENTAL INFORMATION

I. SUMMARY OF DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL

STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL REPORTING

STANDARDS "IFRS" AND THOSE UNDER THE PRC ACCOUNTING RULES AND

REGULATIONS "PRC GAAP"

The Group has also prepared a set of consolidated financial statements in accordance with relevant accounting

principles and regulations applicable to PRC enterprises.

The consolidated financial statements prepared under IFRS and those prepared under PRC GAAP have the following

major differences:

(1) Future development fund and work safety cost

(1a) Appropriation of future development fund is charged to income before income taxes under PRC GAAP.

Depreciation is not provided for plant and equipment acquired by utilizing the future development fund

under PRC GAAP but charged to expenses when acquired.

(1b) Appropriation of the work safety cost is charged to income before taxes under PRC GAAP. Depreciation

is not provided for plant and equipment acquired by utilizing the provision of work safety cost under PRC

GAAP but charged to expenses when acquired.

(2) Consolidation using acquisition method under IFRS and using common control method under PRC GAAP

(2a) Under IFRS, the acquisitions of Jining II, Railway Assets, Heze, Shanxi Group and Hua Ju Energy have been

accounted for using the acquisition method which accounts for the assets and liabilities of Jining II, Railway

Assets, Heze, Shanxi Group and Hua Ju Energy at their fair value at the date of acquisition. Any excess of the

purchase consideration over the fair value of the net assets acquired is capitalized as goodwill.

Under PRC GAAP, as the Group, Jining II, Railway Assets, Heze, Shanxi Group and Hua Ju Energy are

entities under the common control of the Parent Company, the assets and liabilities of Jining II, Railway

Assets, Heze, Shanxi Group and Hua Ju Energy are required to be included in the consolidated balance sheet

of the Group at historical cost. The difference between the historical cost of the assets and liabilities of Jining

II, Railway Assets, Heze, Shanxi Group and Hua Ju Energy acquired and the purchase price paid is recorded

as an adjustment to shareholders' equity.

(2b) Under IFRS, the mining rights of Shanxi Group are stated at purchase consideration less amortization.

Mining rights (coal reserves) are amortized on a unit of production basis. Under PRC GAAP, as both the

Group and Shanxi Group are entities under the common control of the Parent Company, the mining rights

have to be restated at nil cost and no amortization on mining rights will be recognized.

(3) Deferred taxation due to differences between the financial statements prepared under IFRS and PRC GAAP.



SUPPLEMENTAL INFORMATION (continued)

I. SUMMARY OF DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL

STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL REPORTING

STANDARDS "IFRS" AND THOSE UNDER THE PRC ACCOUNTING RULES AND

REGULATIONS "PRC GAAP" (continued)

The following table summarizes the differences between consolidated financial statements prepared under IFRS and

those under PRC GAAP:

Net income attributable to the Net assets attributable to equity holders of the Company equity holders of the for the year ended December 31, Company as at December 31, 2010 2009 2008 2010 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As per consolidated financial statements prepared under IFRS 9,281,386 4,117,322 6,488,908 37,331,886 29,151,807Impact of IFRS adjustments in respect of: – future development fund charged to income before income taxes (222,320) (208,651) (206,107) – – – reversal of provision of work safety cost (147,235) (72,033) (75,692) (610,766) (698,388) – fair value adjustment on mining rights of Shanxi Group and related amortization 6,053 6,053 6,053 (113,618) (118,540) – goodwill arising from acquisition of Jining II, Railway Assets, Heze, Shanxi Group and Hua Ju Energy – – – (528,483) (528,483) – deferred tax 70,283 48,665 87,437 648,135 571,040 – Others 20,454 (11,027) 23,385 (5,435) (19,651)

As per consolidated financial statements prepared under PRC GAAP 9,008,621 3,880,329 6,323,984 36,721,719 28,357,785

Note: There are also differences in other items in the consolidated financial statements due to differences in classification between

IFRS and PRC GAAP.

Chapter 13 Auditors’ Report (PRC)


TO THE SHAREHOLDERS OF YANZHOU COAL MINING COMPANY LIMITED:

We have audited the accompanying financial statements (consolidated and company) of Yanzhou Coal Mining Company

Limited (“the Company”), which comprise the balance sheet as at December 31, 2010, and the income statement, the cash flow

statement, and the statement of changes in equity for the year then ended, and notes to the financial statements.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Company’s management is responsible for the preparation of these financial statements in accordance with the

Accounting Standards for Business Enterprises and the Accounting Regulations for Business Enterprises issued by the

Ministry of Finance of the People’s Republic of China. This responsibility includes: designing, implementing and maintaining

internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to

fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in

the circumstances.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in

accordance with China’s Auditing Standards for the Certified Public Accountants. Those standards require that we comply

with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are

free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial

statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Chapter 13Auditors’ Report (PRC)


OPINION

In our opinion, the financial statements comply with the requirements of the Accounting Standards for Business Enterprises

and the Accounting Regulations for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China

and present fairly, in all material respects, the company and consolidated financial position of the Company as at Dec 31, 2010,

and the company and consolidated results of operations and cash flows of the Company for the year then ended.

ShineWing Certified Public Accountants Co., Ltd

Chinese Certified Public Accountant

Wang Chongjuan

Ji Sheng

Beijing China

March 25, 2011

Chapter 14 Financial Statements and Annotations (Under PRC CASs)


CONSOLIDATED BALANCE SHEETDecember 31, 2010

Prepared by: Yanzhou Coal Mining Company Limited Unit: RMB

NOTES DEC 31, 2010 DEC 31, 2009

ASSETCURRENT ASSET: Cash at bank and on hand VIII. 1 10,790,218,826 12,292,871,151 Excess reserves settlement Lending to banks and other financial institutions Tradable financial assets VIII. 2 239,475,434 37,760,077 Notes receivable VIII. 3 10,408,903,124 4,990,893,624 Accounts receivable VIII. 4 487,769,647 436,554,029 Prepayments VIII. 5 243,210,171 76,447,807 Premiums receivable Accounts receivable reinsurance Reserve for reinsurance contract receivable Interest receivable 2,989,330 3,360,866 Dividends receivable Other receivables VIII. 6 3,542,642,379 295,452,724 Purchase of resold financial assets Inventories VIII. 7 1,646,115,512 886,361,329 Non-current assets due within one year Other current assets VIII. 8 2,113,416,315 1,865,380,324

TOTAL CURRENT ASSETS 29,474,740,738 20,885,081,931

NON CURRENT ASSETS: Offering loan and advance Available-for-sale financial assets VIII. 9 194,259,526 264,672,846 Held-to-maturity investments Long-term accounts receivable Long-term equity investments VIII. 10 1,105,891,526 971,860,469 Investment real estate Fixed assets VIII. 11 18,333,247,229 17,079,527,217 Construction in progress VIII. 12 1,027,571,451 1,180,569,132 Construction materials VIII. 13 17,667,665 12,177,834 Disposal of fixed assets Productive biological assets Oil gas assets Intangible assets VIII. 14 20,119,008,635 19,335,817,869 Development expenditure Goodwill VIII. 15 668,102,483 776,861,570 Long-term deferred assets VIII. 16 18,166,954 15,969,251 Deferred tax assets VIII. 17 1,751,958,422 1,611,884,698 Other non-current assets VIII. 18 117,925,900 117,925,900

TOTAL NON-CURRENT ASSETS 43,353,799,791 41,367,266,786

TOTAL ASSETS 72,828,540,529 62,252,348,717

Chapter 14Financial Statements and Annotations (Under PRC CASs)


CONSOLIDATED BALANCE SHEET (continued)December 31, 2010


NOTES DEC 31, 2010 DEC 31, 2009

LIABILITIES AND SHAREHOLDERS’ EQUITYCURRENT LIABILITIES: Short-term borrowings VIII. 20 295,411,600 – Borrowings from central bank Deposits absorption and intercompany deposit Loans from other banks Tradable financial liabilities VIII. 21 166,177,927 28,332,821 Notes payable VIII. 22 126,958,580 128,076,028 Accounts payable VIII. 23 1,516,920,701 1,306,859,922 Advances from customers VIII. 24 1,473,772,452 1,664,427,222 Amounts from sale of repurchased financial assets Service charge and commissions payable Salaries and wages payable VIII. 25 823,654,677 584,156,171 Taxes payable VIII. 26 1,347,129,196 718,951,045 Interest payable 12,732,426 16,614,257 Dividends payable 1,968,323 265,145 Other payables VIII. 27 2,466,223,721 3,312,206,691 Accounts receivable reinsurance Reserve for insurance contract Acting trading securities Acting underwriting securities Non-current liabilities due within one year VIII. 28 329,267,885 1,620,196,336 Other current liabilities VIII. 8 2,297,502,144 1,560,640,261

TOTAL CURRENT LIABILITIES 10,857,719,632 10,940,725,899

NON-CURRENT LIABILITIES: Long-term borrowings VIII. 29 21,661,499,200 20,911,728,000 Bonds payables Long-term payables VIII. 30 752,325,971 12,244,163 Special accounts payable Accrued liabilities VIII. 31 152,594,177 122,557,899 Deferred tax liabilities VIII. 17 2,580,863,887 1,791,460,318 Other non-current liabilities VIII. 32 15,926,109 14,136,042

TOTAL NON CURRENT LIABILITIES 25,163,209,344 22,852,126,422

TOTAL LIABILITIES 36,020,928,976 33,792,852,321

SHAREHOLDERS’ EQUITY: Share capital VIII. 33 4,918,400,000 4,918,400,000 Capital reserves VIII. 34 4,502,379,121 4,547,651,740 less: treasury stock Special reserves VIII. 35 1,920,406,954 1,463,683,312 Surplus reserves VIII. 36 3,895,859,339 3,241,001,770 Provision for general risk Retained earnings VIII. 37 21,292,197,345 14,168,033,687 Translation reserve 192,476,489 19,014,914

Equity attributable to shareholders of the Company 36,721,719,248 28,357,785,423 Minority interest VIII. 38 85,892,305 101,710,973

TOTAL SHAREHOLDERS’ EQUITY 36,807,611,553 28,459,496,396

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 72,828,540,529 62,252,348,717

The accompanying notes disclosure is the composing part of the financial statements

Legal representative of the Company: Chief Financial Officer: Head of Accounting Department

Li Weimin Wu Yuxiang ZHao Qingchun



BALANCE SHEET OF THE PARENT COMPANYDecember 31, 2010


NOTES DEC 31, 2010 DEC 31, 2009

ASSETCURRENT ASSET: Cash at bank and on hand 7,943,940,336 10,245,945,569 Tradable financial assets Notes receivable 10,407,303,124 4,989,405,336 Accounts receivable XV. 1 77,019,800 28,032,690 Prepayments 64,339,670 42,262,430 Interests receivable Dividends receivable 529,766 291,649 Other receivables XV. 2 3,419,185,058 349,562,607 Inventories 741,057,004 394,989,227 Non-current assets due within one year Other current assets 1,460,318,462 1,359,591,510

TOTAL CURRENT ASSETS 24,113,693,220 17,410,081,018

NON CURRENT ASSETS: Available-for-sale financial assets 194,258,579 264,671,982 Hold-to-maturity investment 3,683,786,850 4,743,313,052 Long-term accounts receivable Long-term equity investments XV. 3 7,423,598,915 5,789,061,956 Investment real estate Fixed assets 6,523,775,012 6,373,159,697 Fixed assets under construction 53,942,258 24,247,529 Materials construction 1,259,017 1,259,017 Disposal of fixed assets Productive biological assets Oil gas assets Intangible assets 590,754,069 607,764,176 Development expenditure Goodwill Long-term deferred assets 74,375 – Deferred tax assets 1,258,874,815 869,395,462 Other non current assets 117,925,900 117,925,900

TOTAL NON CURRENT ASSETS 19,848,249,790 18,790,798,771

TOTAL ASSETS 43,961,943,010 36,200,879,789



BALANCE SHEET OF THE PARENT COMPANY (continued)December 31, 2010


NOTES DEC 31, 2010 DEC 31, 2009

LIABILITIES AND SHAREHOLDERS’ EQUITYCURRENT LIABILITIES: Short-term borrowings Tradable financial liabilities 150,649,643 – Notes payable 126,958,580 128,076,028 Accounts payable 904,338,181 718,406,125 Advances from customers 1,379,301,752 1,507,734,709 Salaries and wages payable 627,461,316 412,981,808 Taxes payable 1,527,916,187 829,238,278 Interest payable Dividends payable Other payables 2,039,520,323 1,663,274,171 Non-current liabilities due within one year – 12,648,464 Other current liabilities 2,238,201,863 1,560,638,332

TOTAL CURRENT LIABILITIES 8,994,347,845 6,832,997,915

NON-CURRENT LIABILITIES: Long-term loans Bonds payable Long-term payable Special accounts payable Accrued liabilities Deferred tax liabilities 28,805,277 50,622,822 Other non-current liabilities

TOTAL NON-CURRENT LIABILITIES 28,805,277 50,622,822

TOTAL LIABILITIES 9,023,153,122 6,883,620,737

SHAREHOLDERS’ EQUITY: Share capital 4,918,400,000 4,918,400,000 Capital reserves 4,603,418,608 4,667,764,243 less: Treasury stock Special reserves 1,830,584,098 1,463,683,312 Surplus reserves 3,859,313,383 3,204,455,814 provision for general risk Retained earnings 19,727,073,799 15,062,955,683

TOTAL SHAREHOLDERS’ EQUITY 34,938,789,888 29,317,259,052

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 43,961,943,010 36,200,879,789




CONSOLIDATED INCOME STATEMENTFor the year ended December 31, 2010


For the year ended For the year endedITEM NOTES Dec 31, 2010 Dec 31, 2009

1 TOTAL OPERATING REVENUE 34,844,387,552 21,500,352,215 Including: Operating revenue VIII. 39 34,844,387,552 21,500,352,215 Interest income Premiums income Income from service charges and commissions

2 TOTAL OPERATING COST 22,871,281,596 16,206,637,288 Including: Operating cost VIII. 39 18,905,963,347 12,220,217,097 Interests expenditure Service charges and commissions expenditure Cash surrender value Net amount of compensation payout Withdrawal net amount of reserve for insurance contract Insurance policy dividend expense Reinsurance expenses Operating taxes and surcharges VIII. 40 517,119,476 428,288,973 Selling expense VIII. 41 1,774,436,355 577,810,555 General and administrative expenses VIII. 42 3,798,388,729 3,156,153,842 Financial expenses VIII. 43 -2,217,300,020 -162,198,893 Impairment loss of assets VIII. 44 92,673,709 -13,634,286 Add: Gain on fair value change (The loss is listed beginning with “-”) Investment income(The loss is listed beginning with “-”) VIII. 45 130,999,778 112,073,890 Including: Investment income of associates Profit on exchange (The loss is listed beginning with “-”)

3 Operating profit (The loss is listed beginning with “-”) 12,104,105,734 5,405,788,817 Add: Non-operating revenue VIII. 46 75,223,391 44,396,546 Less: Non-operating expenditures VIII. 47 65,495,271 39,009,715 Including: Losses on disposal of non-current assets

4 Total profit (The total loss is listed beginning with “-”) 12,113,833,854 5,411,175,648 Less: Income tax VIII. 48 3,100,760,338 1,504,645,421

5 Net profit(The net loss is listed beginning with “-”) 9,013,073,516 3,906,530,227 Net profit attributed to shareholders of the Company 9,008,621,227 3,880,329,329 Minority interest 4,452,289 26,200,898

6 Earnings per share (1) Earnings per share, basis VIII. 49 1.8316 0.7889 (2) Earnings per share, diluted VIII. 49 1.8316 0.7889

7 Other comprehensive income VIII. 50 131,614,536 246,719,961

8 Total comprehensive income 9,144,688,052 4,153,250,188 Total comprehensive income attributable to shareholders of the parent company 9,140,235,763 4,127,049,290 Total comprehensive income attributable to minority shareholders 4,452,289 26,200,898




INCOME STATEMENT OF THE PARENT COMPANYFor the year ended December 31, 2010



1 TOTAL OPERATING REVENUE XV. 4 26,974,371,697 19,734,811,405 Less: Operating cost XV. 4 14,368,541,366 11,103,006,131 Operating taxes and surcharges 491,399,056 417,596,175 Selling expense 312,652,487 388,897,819 General and administrative expense 2,895,372,845 2,715,971,687 Financial expense -35,961,098 -129,167,585 Impairment loss of assets 177,519,590 -14,906,867 Add: Gain from the fair value changes (The loss is listed beginning with “-”) -150,649,643 – Investment income(The loss is listed beginning with “-”) XV. 5 119,086,721 368,640,752 Including: Investment income of associates

2 Operating profit (The loss is listed beginning with “-”) 8,733,284,529 5,622,054,797 Add: Non-operating income 31,706,696 8,938,387 Less: Non-operating expense 30,416,927 7,180,571 Including: Loss on disposal of non-current assets

3 Total profit (The total loss is listed beginning with “-”) 8,734,574,298 5,623,812,613 Less: Income tax 2,185,998,613 1,423,552,412

4 Net profit (The net loss is listed beginning with “-”) 6,548,575,685 4,200,260,201

5 Earnings per share (1) Earnings per share, basis 1.3314 0.8540 (2) Earnings per share, diluted 1.3314 0.8540

6 Other comprehensive income -65,452,635 93,918,616

7 Total comprehensive income 6,483,123,050 4,294,178,817




CONSOLIDATED CASH FLOW STATEMENTFor the year ended December 31, 2010



1 CASH FLOW FROM OPERATING ACTIVITIES: Cash received from sales of goods or rendering of services 33,874,000,988 24,056,114,667 Net increase in customer’s deposits and financial institution deposits Net increase in borrowings from central bank Net amount of loans from other financial institutions Cash received from former-insurance premiums Net cash received from reinsurance business Net increase of insured savings and investment Net increase from disposal of transactional financial assets Cash received from interests, service charge and commissions Net amount of loans from other banks Net amount from repurchasing businesses Tax refunding 445,049,304 63,742,138 Other cash received relating to operating activities VIII. 51 407,317,826 312,891,672

Sub-total of cash inflows 34,726,368,118 24,432,748,477

Cash paid for goods and services 11,622,335,122 5,538,274,189 Net increase in customer’s loans and advance Net increase in deposits in central bank and intercompany Cash paid for former insurance contracts claims Cash paid for interests, service charge and commissions Cash paid for insurance policy dividends Cash paid to and on behalf of employees 6,829,582,168 5,077,898,724 Taxes payments 6,361,809,624 5,652,338,364 Other cash paid relating to operating activities VIII. 51 3,625,057,944 1,992,470,939

Sub-total of cash outflows 28,438,784,858 18,260,982,216

NET CASH FLOW FROM OPERATING ACTIVITIES 6,287,583,260 6,171,766,261



CONSOLIDATED CASH FLOW STATEMENT (continued)For the year ended December 31, 2010



2 CASH FLOW FROM INVESTING ACTIVITIES: Cash received from recovery of investments 440,000 – Cash received from return of investments income 4,800,377 3,276,090 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 33,812,608 4,180,889 Net cash received from disposal of sub companies and business units 1,147,820,630 – Other cash received relating to investing activities VIII. 51 1,488,303,947 –

Sub-total of cash inflows 2,675,177,562 7,456,979

Cash paid to acquire fixed assets, intangible assets and other long-term assets 4,831,258,358 1,734,526,998 Cash paid for investments 2,429,954,321 230,729,250 Net increase of pledge loans Net cash amounts paid by subcompanies and other business units – 20,151,791,943 Other cash paid relating to investing activities VIII. 51 1,787,950,762 2,384,488,113


NET CASH FLOW USED IN INVESTING ACTIVITIES -6,373,985,879 -24,494,079,325

3 CASH FLOW FROM FINANCING ACTIVITIES: Cash received from investors Including: Cash received from minority shareholders of sub companies Cash received from borrowings 1,110,954,100 20,840,504,916 Cash received from issuing bonds Other cash received relating to financing activities VIII. 51 38,305,768 –


Repayments of borrowings and debts 494,440,378 308,705,525 Cash paid for distribution of dividends or profits, or cash paid for interest expenses 1,667,927,059 2,033,118,976 Including: Cash paid for distribution of dividends or profits by sub companies to minority shareholders Other cash paid relating to financing activities VIII. 51 745,565,671 –


NET CASH FLOW USED IN FINANCING ACTIVITIES -1,758,673,240 18,498,680,415

4 EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 93,989,384 -98,112,909

5 NET INCREASE (DECREASE) ON CASH AND CASH EQUIVALENTS VIII. 51 -1,751,086,475 78,254,442 Add: Cash and cash equivalent, opening VIII. 51 8,522,398,899 8,444,144,457

6 Cash and cash equivalents, closing VIII. 51 6,771,312,424 8,522,398,899




CASH FLOW STATEMENT OF THE PARENT COMPANYFor the year ended December 31, 2010



1 CASH FLOW FROM OPERATING ACTIVITIES: Cash received from sales of goods and rendering of services 25,868,361,178 21,995,086,374 Tax refunding Other cash received relating to operating activities 175,308,932 283,000,132


Cash paid for goods and services 9,507,389,296 5,062,314,446 Cash paid to and on behalf of employees 5,302,041,246 4,459,889,261 Taxes payments 5,848,101,166 5,434,342,777 Other cash paid relating to operating activities 1,118,109,502 1,546,433,727


NET CASH FLOW FROM O PERATING ACTIVITIES 4,268,028,900 5,775,106,295

2 CASH FLOW FROM INVESTING ACTIVITIES: Cash received from recovery of investments 234,440,000 80,000,000 Cash received from return of investments 203,818,836 172,643,325 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 6,996,926 3,967,894 Net cash amount received from the disposal of sub companies and other business units Other cash received relating to investing activities 1,203,748,793 –

Sub-total of cash inflows 1,649,004,555 256,611,219

Cash paid to acquire fixed assets, intangible assets and other long-term assets 1,636,296,712 807,282,404 Cash paid for investments 4,121,992,800 2,402,985,903 Net cash amounts paid by subcompanies and other business units Other cash paid relating to investing activities 289,606,749 2,353,722,363


NET CASH FLOW USED IN INVESTING ACTIVITIES -4,398,891,706 -5,307,379,451



CASH FLOW STATEMENT OF THE PARENT COMPANY (continued)For the year ended December 31, 2010



3 CASH FLOW FROM FINANCING ACTIVITIES: Cash received from investors Cash received from borrowings cash received from issue of bonds Cash received relating to other financial activities

Sub–total of cash inflows – –

Repayments of borrowings Cash paid for distribution of dividends or profits, or cash paid for interest expenses 1,229,600,000 1,967,360,000 Other cash payment relating to financial activities Sub-total of cash outflows 1,229,600,000 1,967,360,000

NET CASH FLOW USED IN FINANCING ACTIVITIES -1,229,600,000 -1,967,360,000

4 EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS -27,400,382 1,986,404

5 NET INCREASE (DECREASE) ON CASH AND CASH EQUIVALENTS -1,387,863,188 -1,497,646,752 Add: Cash and cash equivalent, opening 6,724,043,764 8,221,690,516

6 Cash and cash equivalents, closing 5,336,180,576 6,724,043,764






Amount for the year 2010 Attribute to shareholders of the Parent Company Foreign currency Total of Share Capital Less: treasury Special Surplus Provision Retained translation Minority shareholders’ITEM capital reserves stock reserves reserves for General earnings difference interest interest

I. Balance at December 4,918,400,000 4,547,651,740 – 1,463,683,312 3,241,001,770 – 14,168,033,687 19,014,914 101,710,973 28,459,496,396 Add: Change in accounting policies – Correction of errors in the early stage – Others –

II. Balance at January 1, 2010 4,918,400,000 4,547,651,740 – 1,463,683,312 3,241,001,770 – 14,168,033,687 19,014,914 101,710,973 28,459,496,396III Changes for the year (The decrease is listed beginning with “-”) – -45,272,619 – 456,723,642 654,857,569 – 7,124,163,658 173,461,575 -15,818,668 8,348,115,157 (I) Net profit 9,008,621,227 4,452,289 9,013,073,516 (II) Other comprehensive income -41,847,039 173,461,575 131,614,536

Sub-total of (I) and (II) – -41,847,039 – – – – 9,008,621,227 173,461,575 4,452,289 9,144,688,052

(III) Owner’s contributions and reduction in capital – -4,532,580 – – – – – – -18,852,705 -23,385,285 1. Increase of the registered capital to Heze Neng Hua -4,518,430 4,518,430 – 2. Impact of Yancoal Australia -23,371,135 -23,371,135 3. Acquisition of minority equity in sub companies -14,150 -14,150

(IV) Profit distribution – – – – 654,857,569 – -1,884,457,569 – -1,870,818 -1,231,470,818 1. Transfer to surplus reserve 654,857,569 -654,857,569 – 2. Provision for general risks – 3. Distribution to shareholders -1,229,600,000 -1,870,818 -1,231,470,818 4. Others –

(V) Internal settlement and transfer of owners’ equities – – – – – – – – – – 1. Capital reserve transferred share capital – 2. Surplus reserve transferred share capital – 3. Provision of surplus reserve for loss – 4. Others –

(VI) Special reserves – – – 456,723,642 – – – – 452,566 457,176,208 1. Provision of the year 610,381,314 452,566 610,833,880 2. Usage of the year -153,657,672 -153,657,672

(VII) Others 1,107,000 1,107,000

IV. Balance at Dec 31, 2010 4,918,400,000 4,502,379,121 – 1,920,406,954 3,895,859,339 – 21,292,197,345 192,476,489 85,892,305 36,807,611,553



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)For the year ended December 31, 2010


Amount for the year 2009 Attribute to shareholders of the Parent Company Foreign currency Total of Share Capital Less: treasury Special Surplus Provision Retained translation Minority shareholders’ITEM capital reserves stock reserves reserves for General earnings difference interest interest

I. Balance at December 31, 2009 4,918,400,000 5,066,355,339 1,164,283,864 2,820,975,750 12,710,055,378 -115,168,599 199,728,741 26,764,630,473 Add: Change in accounting policies – Correction of errors in the early stage – Others –

II. Balance at January 1, 2010 4,918,400,000 5,066,355,339 – 1,164,283,864 2,820,975,750 – 12,710,055,378 -115,168,599 199,728,741 26,764,630,473

III. Changes for the year (The decrease is listed beginning with “-”) – -518,703,599 – 299,399,448 420,026,020 – 1,457,978,309 134,183,513 -98,017,768 1,694,865,923 (I) Net profit 3,880,329,329 26,200,898 3,906,530,227 (II) Other comprehensive income 112,536,448 134,183,513 246,719,961

Sub-total of (I) and (II) – 112,536,448 – – – – 3,880,329,329 134,183,513 26,200,898 4,153,250,188

(III) Owner’s contributions and reduction in capital – -631,240,047 – – – – – – -111,467,882 -742,707,929 1. Purchase of Felix 23,542,370 23,542,370 2. Consolidation under common control -593,243,100 -593,243,100 3. Acquisition of minority equity in sub companies -37,996,947 -135,010,252 -173,007,199

(IV) Profit distribution – – – – 420,026,020 – -2,422,351,020 – -12,750,784 -2,015,075,784 1. Transfer to surplus reserve 420,026,020 -420,026,020 – 2. Provision for general risks – 3. Distribution to shareholders -2,002,325,000 -12,750,784 -2,015,075,784 4. Others –

(V) Internal settlement and transfer of owners’ equities – – – – – – – – – – 1. Capital reserve transferred share capital – 2. Surplus reserve transferred share capital – 3. Provision of surplus reserve for loss – 4. Others –

(VI) Special reserves – – – 299,399,448 – – – – – 299,399,448 1. Provision of the year 467,032,327 467,032,327 2. Usage of the year -167,632,879 -167,632,879 (VII) Others –

IV. Balance at Dec 31, 2010 4,918,400,000 4,547,651,740 – 1,463,683,312 3,241,001,770 – 14,168,033,687 19,014,914 101,710,973 28,459,496,396




STATEMENT OF CHANGES IN EQUITY OF THE PARENT COMPANYFor the year ended December 31, 2010


Amount for the year 2010 Total of Share Capital Less: treasury Special Surplus Provision Retained shareholders’ITEM capital reserves stock reserves reserves for General earnings interest

I. Balance at December 31, 2009 4,918,400,000 4,667,764,243 – 1,463,683,312 3,204,455,814 – 15,062,955,683 29,317,259,052 Add: Change in accounting policies – Correction of errors in the early stage – Others –

II. Balance at January 1, 2010 4,918,400,000 4,667,764,243 – 1,463,683,312 3,204,455,814 – 15,062,955,683 29,317,259,052

III. Changes for the year (The loss is listed beginning with “-”) – -64,345,635 – 366,900,786 654,857,569 – 4,664,118,116 5,621,530,836 (I) Net profit 6,548,575,685 6,548,575,685 (II) Other comprehensive income -65,452,635 -65,452,635

Sub-total of (I) and (II) – -65,452,635 – – – – 6,548,575,685 6,483,123,050

(III) Owner’s contributions and reduction in capital – – – – – – – – 1. Capital from shareholders – 2. The amount listed in shareholders equity from share payment – 3. Others –

(IV) Profit distribution – – – – 654,857,569 – -1,884,457,569 -1,229,600,000 1. Transfer to surplus reserve 654,857,569 -654,857,569 – 2. Provision for general risks – 3. Distribution to shareholders -1,229,600,000 -1,229,600,000 4. Others –

(V) Internal settlement and transfer of owners’ equities – – – – – – – – 1. Capital reserve transferred share capital – 2. Surplus reserve transferred share capital – 3. Provision of surplus reserve for loss – 4. Others –

(VI) Special reserves – – – 366,900,786 – – – 366,900,786 1. Provision of the year 479,940,003 479,940,003 2. Usage of the year -113,039,217 -113,039,217

(VII) Others 1,107,000 1,107,000

IV. Balance at Dec 31, 2010 4,918,400,000 4,603,418,608 – 1,830,584,098 3,859,313,383 – 19,727,073,799 34,938,789,888




STATEMENT OF CHANGES IN EQUITY OF THE PARENT COMPANY (continued)For the year ended December 31, 2010


Amount for the year 2009 Total of Share Capital Less: treasury Special Surplus Provision Retained shareholders’ITEM capital reserves stock reserves reserves for General earnings interest

I. Balance at December 31, 2009 4,918,400,000 4,740,572,479 1,164,283,864 2,784,429,794 13,250,081,502 26,857,767,639 Add: Change in accounting policies – Correction of errors in the early stage – Others –

II. Balance at January 1, 2010 4,918,400,000 4,740,572,479 – 1,164,283,864 2,784,429,794 – 13,250,081,502 26,857,767,639

III. Changes for the year (The loss is listed beginning with “-”) – -72,808,236 – 299,399,448 420,026,020 – 1,812,874,181 2,459,491,413 (I) Net profit 4,200,260,201 4,200,260,201 (II) Other comprehensive income 93,918,616 93,918,616

Sub-total of (I) and (II) – 93,918,616 – – – – 4,200,260,201 4,294,178,817

(III) Owner’s contributions and reduction in capital – -166,726,852 – – – – – -166,726,852 1. Capital from shareholders – 2. consolidation under common control -166,726,852 -166,726,852 3. Others –

(IV) Profit distribution – – – – 420,026,020 – -2,387,386,020 -1,967,360,000 1. Transfer to surplus reserve 420,026,020 -420,026,020 – 2. Provision for general risks – 3. Distribution to shareholders -1,967,360,000 -1,967,360,000 4. Others –

(V) Internal settlement and transfer of owners’ equities – – – – – – – – 1. Capital reserve transferred share capital – 2. Surplus reserve transferred share capital – 3. Provision of surplus reserve for loss – 4. Others –

(VI) Special reserves – – – 299,399,448 – – – 299,399,448 1. Provision of the year 467,032,327 467,032,327 2. Usage of the year -167,632,879 -167,632,879

(VII) Others –

IV. Balance at Dec 31, 2010 4,918,400,000 4,667,764,243 – 1,463,683,312 3,204,455,814 – 15,062,955,683 29,317,259,052




NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010(The currency is in RMB Yuan except otherwise indicated)

I. GENERAL

Yanzhou Coal Mining Company Limited (the “Company”) is a stock company with limited liability established in

the People’s Republic of China (the “PRC”). The Company was established in September, 1997 by Yankuang Group

Corporation Limited (the “Yankuang Group”) in accordance with the Tigaisheng (1997) No. 154 document issued by

“National Economic System Reform Commission of People’s Republic of China”. The address of the registered office is

Zoucheng City, Shandong Province. The total share capital was RMB1,670 million with Par value per share of RMB1.00

when the Company was set up.

As approved by Zhengweifa (1997) No.12 document issued by Securities Committee of State Council, the Company

issued H shares with face value of RMB820 million to Hong Kong and international investors in March 1998. The

American underwriters exercised the excessive issue option and the Company issued additional H Shares of RMB30

million. The above shares were listed and traded on Stock Exchange of Hong Kong Limited on April 1, 1998, and the

American Depository Shares was listed in the New York Stock Exchange on March 31, 1998. The total share capital has

changed to RMB2,520 million after these issues. The company issued 80 million new A shares in June 1998. The above

shares went public and were traded on Shanghai Stock Exchange since July 1, 1998. After many issues and bonus shares,

the share capital of the Company increased to RMB4,918.40 million by December 31, 2010.

The Company and its subsidiary companies (hereinafter collectively referred to as the “Group”) are mainly engaged in

the coal mining and preparation, coal sales, cargo transportation by self-operated railways, road transportation, port

operation, comprehensive scientific and technical service for coal mines, methanol production and sales etc.

II. THE PREPARATION FOUNDATION OF FINANCIAL STATEMENTS

The Group takes going concern as the basis of financial statements. The financial statements are prepared in according

with the Accounting Standards for Business Enterprises-Basic Standard (hereinafter referred to as “new CASs” or

“ASBEs”) and 38 specific accountings standard issued by the Ministry of Finance (MOF) on February 15, 2006, and later

issued application guide to the ASBE, the interpretation of ASBE and relevant regulations, and Information Disclosure

and Presentation Rules for Companies Making Public Offering No. 15 – General Provisions on Financial Reporting

(Revised 2010) issued by China Securities Regulatory Commission.

III. DECLARATION OF COMPLIANCE WITH ASBES

The financial statements of the Group have been prepared in accordance with the new ASBEs and have been presented

completely and genuinely with the financial information of the Group such as its financial position, operating results

and cash flows and so on.



IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND

PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting period

The accounting period is from the Calendar year January 1st to December 31st.

2. Functional currency

The functional currency of the Company except overseas subsidies is Renminbi (RMB). As the primary economic

environment for overseas subsidiaries of the Company, Yancoal Australia Pty Limited and its subsidiaries are in

Australia, the functional currency of the two Companies is AUD. On the conversion method from AUD to RMB,

please refers to Note “IV.5”.

3. Basis of accounting and principle of measurement

The Company has adopted the accrual basis of accounting and used the historical cost convention as the principle

of measurements for assets and liabilities except for tradable financial assets, available-for-sale financial assets and

hedging instruments, which are measured at their fair values.

4. Cash and cash equivalents

Cash in cash flow are cash on hand and deposits available for payment at any time. Cash equivalents in cash flow

are investments which are short-term (normally become due within 3 months after purchasing date), highly

liquid, readily convertible to known amounts of cash, and subject to an insignificant risk of changes in value.

5. Foreign currency and the translation of financial statements denominated in foreign currency

(1) Foreign currency translation

Foreign currency transactions are converted to the functional currency at the spot exchange rate of the day

when the transaction occurs. At the balance sheet date, foreign currency monetary items are translated to

the functional currency using the spot exchange rate of the day. Exchange differences arising are recognized

in profit or loss for the current period, except for the exchange differences arising on the borrowing costs

eligible for acquisition, construction or production of assets which are qualified for capitalization. Foreign

currency non-monetary items measured at fair value are translated using the exchange rates at the date when

the recognized fair value is determined. The differences between the amount of the functional currency

before and after conversion are recognized in profit or loss or interests of shareholders as changes of fair

value. Foreign currency non-monetary items measured at historical cost are translated at the spot exchange

rates at the date of the transactions, and do not change the functional currency amount.





(continued)

(2) Translation of financial statements denominated in foreign currency

The asset and liability items on the balance sheet of foreign currency are converted to RMB at the spot

exchange rate of the balance sheet date; other items are converted at the sport exchange rate of the day when

the transaction occurs, except retained earnings on shareholders’ equity. The revenue and expense items

on the income statement of overseas subsidiaries are converted to RMB at the approximate rate of the spot

exchange rate of the day when the transaction occurs. Exchange differences arising from the above issues are

presented separately under the shareholders’ equity items.

Cash flows denominated in foreign currency or from a foreign subsidiary are translated at the approximate

rate of the spot exchange rate of the day when the transaction occurs. The effect of fluctuations of exchange

rates on cash and cash equivalents is presented separately as a reconciling item in the cash flow statement.

6. Financial assets and financial liabilities

(1) Financial assets

Upon initial recognition, financial assets are classified into the following categories: financial assets at ‘fair

value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial

assets and ‘loans and receivables’.

1) Financial assets at FVTPL:

A financial asset is held for trading if it has been acquired principally for the purpose of selling in the

short term and presented as the tradable financial assets in the balance sheet. Except for the purpose of

hedging, derivative financial instruments are classified into financial assets or liabilities at FVTPL.

2) Held-to-maturity investment

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments

and fixed maturity date that the enterprise has the clear intention and ability to hold to maturity.

3) Receivables:

Non-derivative financial assets with fixed or determinable payments are not quoted in an active

market.





(continued)

6. Financial assets and financial liabilities (continued)

(1) Financial assets (continued)

4) AFS financial assets

AFS financial assets are those non-derivative financial assets that are designated as available for sale

or are not classified as (1) financial assets at FVTPL, (2) loans and receivables, or (3) held-to-maturity

investments.

Financial assets are initially measured at fair value. Transaction costs that are directly attributable

to the acquisition or issue of financial assets and financial liabilities (other than financial assets at

fair value through profit or loss) are added to or deducted from the fair value of the financial assets,

as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of

financial assets at fair value through profit or loss are recognized directly in profit or loss. Financial

assets are no longer recognised when the rights to receive cash flows from the assets expire or, the

financial assets are transferred and the Group has transferred substantially all the risks and rewards of

ownership of the financial assets.

Financial assets and AFS financial assets at FVTPL are subsequently measured at fair value. The

receivables and held-to-maturity investments are carried at the unamortized cost using the effective

interest rate method.

Changes in fair value of financial assets at FVTPL are included in profit or loss for the period at fair

value. The received interest during the period holding assets shall be recognized as investment income.

On disposing of it, the difference between fair value and initial accounting value shall be recognized

as in profit or loss statements on investment, and the profit or loss at the fair value is also adjusted

accordingly.

The changes in fair value of AFS financial assets are recorded in the shareholder’s equity. The interest

calculated by actual interest rate during the period holding assets shall be recognized as investment

income. The cash dividends on investments in an AFS equity instrument shall be recorded into the

investment income when cash dividends are declared and issued by the investee. On disposing it,

the difference after changing the fair value accumulated amount from the amount received and the

carrying amount deducting the original shareholder’s equity shall be recorded into the investment

profit and loss.

The Company estimates the carrying amount of a financial asset at the balance sheet date (other than

those at FVTPL). If there is objective evidence that the financial asset is impaired, the Company shall

determine to accrue the amount of any impairment loss. If the fair value of an AFS financial asset

declines substantially or non-temporarily, the accumulated loss arising from this decline that had been

recognized directly in shareholders’ equity shall be recognized in the profit or loss statement.





(continued)

6. Financial assets and financial liabilities (continued)

(2) Financial liabilities

Upon initial recognition, financial liabilities are classified as either financial liabilities ‘at fair value through

profit or loss’ (FVTPL) or ‘other financial liabilities’.

Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is

designated as at FVTPL. Financial liabilities at FVTPL are subsequently measured at fair value, with gains

or losses arising from changes in fair value as well as dividends and interest income related to such financial

liabilities recognized in profit or loss for the period.

Other financial liabilities are subsequently measured at unamortized cost using the effective interest method.

(3) Method of fair values recognition of financial assets and financial liabilities

If there is an active market for financial instrument, the quoted market price in an active market is used to

determine the fair value of the financial instrument. In the active market, financial assets held or financial

liabilities intending to bear by the Group take the current quoted price as the fair value of the relevant assets

and liabilities. Financial assets intending to buy or financial liabilities borne by the Group take the current

offer price as the fair value of the relevant assets and liabilities. If there are no quoted price and offer price

for financial assets and liabilities, and the economic conditions do not change significantly after the latest

transaction, the latest quotation is used to determine the fair value of such financial assets or liabilities.

If there is no active market for financial instrument, the fair values are determined by evaluation method,

including to consult the latest prices in the marketing transaction by the parties who are familiar with the

market and make the transaction Voluntarily, the current fair values of the other virtually identical financial

assets, discounted method of cash flow and options pricing modes.

The fair values of forward foreign exchange contracts of the Company and its overseas subsidiaries shall be

determined by the market exchange rate at balance sheet date. Fair values of coal swap contracts shall be

determined by the market price of forward coal market at balance sheet date. Fair values of interest swap

contracts of the Company and its overseas subsidiaries shall be determined by the present value of estimated

future cash flows.





(continued)

7. Accounting method for bad debt provisions of the receivables

The following situations are considered as criteria of recognizing bad debt as loss of receivables: revocation,

bankruptcy, insolvency, seriously shortage of cash flows, out of business caused by serious natural disaster and

unable to pay off the debt within the foreseeable time, other solid evidence indicating that debt can’t be recovered

or be of a slim chance.

The allowance method is applied to the possible loss of bad debt, the impairment shall be assessed separately or in

combination, the Company shall be determined to accrue the bad debt provisions which shall be calculated into

the current profits and losses. If there is defined evidence for the receivables not to or not likely to be received,

which shall be classified into the loss of bad debt and write off the accrued bad debts provisions after going

through the approval procedure of the Company.

(1) The receivables with individual significant amount accruing bad debts provisions

Judgment basis or amount standards of

individual significant amount

The receivables with more than RMB 8 million

individual amount shall be classified into the

significant receivables;

The accruing method of the receivables with

individual significant amount

The bad debt provisions shall be accrued based

on the difference between current value of future

cash flow and the carrying amount.

(2) Accruing the bad debt provision according to the portfolio

The basis of portfolio

Accounting aging Use the accounting aging of the receivables as the credit risk

characteristics to classify the portfolio

Risk-free Use the amount characteristics of the receivables, the relation with

transaction party and its credit as characteristics to classify the portfolio

The accrual method

Accounting aging Accrue the bad debt provision by accounting aging analysis method

Risk-free Not accrue the bad debt provision





(continued)

7. Accounting method for bad debt provisions of the receivables (continued)

(2) Accruing the bad debt provision according to the portfolio (continued)

The percentage of bad debt provision is as followings according to accounting aging:

Accrual Accrual

percentage percentage

of the of other

Accounting aging receivables receivables

within 1 year 4% 4%

1-2 years 30% 30%

2-3 years 50% 50%

over 3 years 100% 100%

(3) The individually insignificant receivables accruing the bad debt provision

Accrual reason The individual amount is not significant, but the accrued bad debt

provision on the basis of portfolio can not reflect its risk.

Accrual method The bad debt provisions shall be accrued based on the difference between

current value of future cash flow and the carrying amount.

8. Inventories

(1) the classification of inventories: The inventories include the raw materials, coal stock, low value consumables

and so on.

(2) the pricing method of receiving and issuing inventories: The Company adopts a perpetual inventory system

to calculate its inventory, using the actual cost pricing for procurement of inventories, and weighted average

approach for consumptions and delivery of inventories.

(3) The end-of-period inventories are measured at the lower one between the cost and the convertible net value.

If the inventories are damaged, become partially or completely obsolete or sold at price lower than cost,

unrecoverable cost shall be estimated and recognized as a provision for decline in value. The excess of cost

over the convertible net value is generally recognized as provision for decline in value of inventories on a

separate inventory item basis.

(4) Net realisable value of inventories directly for sale, such as commodity stocks and materials for sale, is

the estimated selling price less the estimated costs necessary to make the sale and other related taxes; Net

realisable value of material stocks for product is the estimated selling price less the estimated costs, the

estimated marketing cost and other related taxes of the finished production occurred





(continued)

9. Long-term equity investments

Long-term equity investments mainly include equity investments held by the Group which exercise control, joint

control or significant influence on the investee, which has no control, joint control or significant influence on the

investee, and which has no offer in active market and whose fair values cannot be reliably measured.

Joint control means mutual control over certain economic activities under contract. The main basis to define joint

control is that any party of the joint venture cannot control the production and business operations of the venture

individually, and the decisions involving the basic production and business operations need the unanimous

consent from all parties.

Significant influence means that the investor has the right to participate decision-making for the finance and

operating policies of investee and has no control or joint control with other parties on policies-making. The main

basis to define significant influence is that the Group holds directly or indirectly through subsidiaries above 20%

(included) but less than 50% voting shares of investee. Significant influence cannot be recognized if there is solid

evidence indicating that the investor cannot participate in the decision-making of investee.

For a business combination involving enterprise under common control, the initial investment cost of the

long-term equity investment is the carrying amount of the owner’s equity of the party being absorbed at the

combination date. For a business combination not involving enterprises under common control, the initial

investment cost of the long-term equity investment acquired is the aggregate of the fair value, at the acquisition

date, of the acquiree’s identifiable assets, liabilities and contingent liabilities acquired.

For a long-term equity investment acquired by cash payment, the initial investment cost shall be the actual

purchase price that has been paid. Initial investment cost also includes those costs relevant to the acquisition of

the long-term equity investment, taxes and other necessary expenditures directly attributable to the acquisition of

the long-term equity investment. For a long-term equity investment acquired by the issue of equity securities, the

initial investment cost shall be the fair value of the securities issued. A long-term equity investment invested by

investors, the initial investment cost use the values described in investment contract or agreement. For a long-term

equity investment acquired by debts re-organization or non-currency assets transaction, the initial investment cost

shall be recognized in accordance with relevant accounting standards.

The cost method is applied in calculating the subsidiaries investment, equity method used in adjusting the

consolidated financial statements. If the Company does not have joint control or significant influence over the

investee, the investment is not quoted in an active market and its fair value cannot be reliably measured, a long-

term equity investment shall be calculated using the cost method. If the Company does not have control, joint

control or significant influence over the investee and the fair value of the long-term equity investment can be

reliably measured, the investment shall be calculated as an available-for-sale financial asset.





(continued)

9. Long-term equity investments (continued)

Under the cost method, long-term equity investments are measured at initial investment cost, and the investment

cost shall be adjusted when the investments are added and recovered. Under the equity method, the current

investment profit and loss are the net profits and losses created by the investee and shared by the Company. The

share of net profits or losses from the investee should be confirmed, based on the fair values of identifiable assets

on the acquisition date, according to the accounting policies and accounting period of the Group, offsetting

inter-segment transactions profit and loss created by joint venture and associated enterprises which belong to

the investor in terms of shares proportion, and after adjusting the net profit from investee. The Group shall, if

there is debt balance relating to the long-term equity investment on the joint venture and associates hold before

the executing date, deduct the debt balance which should amortize within remaining term, and recognize the

investment profits and losses.

For the reason of decreasing investment, the Group no longer has any joint control or significant influence on

the investee, and in active market the long-term equity investment, which has no offer and fair values and cannot

be reliably measured, shall be measured by cost method. For the reason of increasing investment, the Group is

able to exercise control over the investee, the measurement shall be changed into cost method. For the reason of

increasing investment, the Group is able to exercise joint control or significant influence but unable to exercise

control on the investee, or for the reason of disposal of investment, the Group is unable to exercise control but

able to exercise joint control or significant influence over the investee, the measurement shall be changed into cost

method.

When long-term equity investment is disposed, the difference between the carrying value and the actual

consideration is recognized as investment return of the period; under equity method, the long-term equity

investments, which is recognized as shareholder’s equity of the investor arising on the change of investee’s

shareholder equity (other than net loss and profit), is included in investment return of the period according to the

relevant proportion.





(continued)

10. Fixed assets

(1) Recognition of fixed assets: Fixed assets are tangible assets that are held for production or operation, and

have a service life more than one accounting year.

(2) Category of fixed assets: Buildings, coal mine buildings, ground buildings, harbour works and craft, plant,

machinery and equipment, transportation equipment, land etc.

(3) Measurement of fixed assets: The fixed assets shall be initially measured at actual cost of acquisition

considering the effect of any expected costs of disposing the asset. Among these, the costs of outsourcing

fixed assets include purchase price, duties and expenses such as purchasing cost, VAT, import tariff,

other expenses incurred to ensure estimated usage of the fixed assets that can be directly included in the

assets. The costs to build the fixed assets include necessary expenses incurred to ensure the usage status

of the assets. The accounting value of the fixed assets invested by the investors shall be in accordance with

the values specified in the investment contract or agreement, while for the unfair value specified in the

contract or agreement, shall be regarded as fair value in accounting value. Fixed assets by financial lease are

recognized at the lower of fair value of such assets at leasing date and the present value of minimum lease

payment.

(4) Subsequent expenditure of fixed assets: the subsequent expenditure includes expenses for repair, renovation

and improvement, which shall be recognized as fixed asset cost provided that the expenditures confirm to

the conditions of fixed assets recognition. With regard to the replaced parts, the carrying value shall not be

recognized and other subsequent costs incurred shall be recognized in the gain and loss in the period.

(5) Depreciation approach of fixed assets: The depreciation is provided to all fixed assets except those that

have already accrued depreciation and lands category. The mining structures are depreciated using the

estimated production capacity method, and other fixed assets using the average service life method. The

Group’s estimated residual value for fixed assets is 0-3%, the estimated residual rate; useful life and annual

depreciation rate of each category of fixed assets using the average service life method are as follows:

Estimated Annual residual depreciationNo. Category Useful life value rate rate (years) (%) (%)

1 House Buildings 10-30 0-3 3.23-10.002 Ground buildings 10-25 0-3 3.88-10.003 Harbour works and crafts 40 0 2.504 Plant, machinery and equipment 2.5-25 0-3 3.88-40.005 Transportation equipment 6-18 0-3 5.39-16.67





(continued)

10. Fixed assets (continued)

(5) (continued)

The vessels of Shandong Yancoal Shipping Co., Ltd. are depreciated over 18 years. All the other

transportation equipments are depreciated over 6 to 9 years.

Land category refers to that of overseas subsidiaries and no depreciation is provided for as the subsidiaries

enjoy the permanent ownership.

(6) The Company shall review the useful life and estimated net residual value of a fixed asset and the

depreciation method applied at each financial year-end. A change in the useful life or estimated net residual

value of a fixed asset or depreciation method used shall be treated as a change in an accounting estimate.

(7) Fixed assets that cannot bring economic returns after treatment or are not expected to bring economic

returns after use or treatment shall be no longer recognized. When a fixed asset is sold, transferred, scraped

or damaged, the enterprise shall recognize the amount of any proceeds on disposal of the asset net of the

carrying value and related taxes in profit or loss for the current period.

(8) Recognition basis and measurement method of fixed assets by financial lease: Financial lease is a lease that

substantially transfers all risks and rewards relating to ownership of an asset. Fixed assets by financial lease

are recognized at the lower of fair value of the assets and the present value of minimum lease payment. The

leased assets shall be depreciated at a straight-line basis over the shorter of service life and leasing term.

The net income, from sales and leaseback transaction which has been recognized as financial lease, shall be

recorded as deferred revenue on balance sheet, be amortized at a straight-line basis over the leasing term and

recognized in the income statements.

11. Construction in progress

(1) the pricing approach of the constructions in progress: To be measured at the actual costs incurred for the

construction. The self-operated construction is recorded at all cost of direct materials, direct salary, and

direct construction expenditures etc. The contracting construction is recorded at the payable construction

cost and so on. The equipment installation cost is measured at value of the installed equipment, installation

cost, all expenses incurred for project test-run. The cost of constructions in progress also includes capitalized

borrowing costs, gain and loss from currency exchange.

(2) Standard and time of transfer from the constructions in progress to the fixed assets: The constructions in

progress shall be transferred to the fixed assets from the date of starting its foreseeable usable condition

based on their construction budget, construction pricing or project actual cost and so on, and its

depreciation will begin from the next month. The difference of the fixed assets original values shall be

adjusted upon the resolution procedures of the project completion.





(continued)

12. Borrowing costs

Borrowing costs include loan interests, amortization of premiums or discounts, auxiliary expenses and exchange

differences arising on foreign currency borrowing. When expenditures for the asset and borrowing costs are being

incurred, activities relating to the acquisition, construction or production of the asset that are necessary to prepare

the asset for its intended use or sale have commenced, borrowing costs, which are directly attributable to the

acquisition, construction or production of a qualifying asset, shall be capitalized. Capitalization of borrowing costs

shall be discontinued when acquired and constructed production is available for use or sale. Other borrowing costs

shall be recognized as costs for the current period.

The amount of interest of specific borrowings occurred for the period shall be capitalized after deducting bank

interest earned from depositing the unused borrowings or any investment income on the temporary investment.

The capitalized amount of general borrowings shall to be determined at the basis that the weighted average (of the

excess amounts of cumulative assets expenditures above the specific borrowings) times capitalization rate (of used

general borrowings). The capitalization rate shall be determined according to the weighted average interest rates of

general borrowings.

Assets eligible for capitalization represent fixed assets, investment property, inventories, etc, which shall take a

long time (generally above one year) for acquisition, construction or production to be ready for the specific use or

sale.

If an asset eligible for capitalization is interrupted abnormally and continuously for more than 3 months during

the purchase, construction or production, capitalization of borrowing costs shall be suspended until the above

interrupted activities restart.





(continued)

13. Intangible assets

(1) The pricing method of intangible assets: The intangible assets of the Group include mainly mining rights,

unproved mining interests, expenditure for the exploration and evaluation, the land use rights, patents and

techniques etc. For purchased intangible assets, actual paid cost and other relevant expenses are used as

the actual cost. For intangible assets invested by investors, the actual cost is determined according to the

values specified in the investment contract or agreement, while for the unfair agreed value in contract or

agreement, the actual cost is determined at the fair value.

(2) The land use rights are evenly amortized over the transferred term since the rights are obtained. The mining

rights are amortized under units of production method. The patent and technology with limited life shall be

amortized under composite life method. The patent and technology with unsure life shall not be amortized.

The amortized amounts shall be included in the cost of related assets or profit or loss for the period in which

they are incurred based on the beneficiary objects.

(3) For an intangible asset with a finite useful life, the Company shall review the useful life and the amortization

method applied at each financial year-end. A change in the useful life or amortization method used shall be

accounted for as a change in an accounting estimate. For an intangible asset with an indefinite useful life, the

Company shall reassess the useful life of the asset in each accounting period. If there is evidence indicating

that the useful life of that intangible asset is finite, the Company shall amortize that intangible asset over the

estimated useful life.

14. Exploration and evaluation expenditures

Exploration and evaluation activities include the search for mineral resources, identification of the technical

feasibility and evaluation of the commercial feasibility of the distinguished resource. Exploration and evaluation

expenditures includes the direct costs of the following activities: research and analysis of historical exploration

data; data collection from the topography, geochemical and geophysical exploration and research; exploration

drilling, trenching and sampling; identifying and reviewing the amount and level of resources; measuring

transport and infrastructure requirements; and conducting market and financial research.

In the early stages of projects exploration, exploration and evaluation expenditures occurred is credited to profit

or loss are incurred. When the project has the technical feasibility and commercial viability, the exploration and

evaluation expenditure (including the costs incurred for purchase of exploration permit) are capitalised into

exploration and evaluation assets by a single item.

Exploration and evaluation assets are collected into construction in progress. These assets are converted into fixed

assets or intangible assets when getting ready for their intended use, and accrued depreciation or amortization

within operating life. The related unrecoverable cost shall be immediately written off and credited as profit or loss

when projects are abandoned.





(continued)

15. Impairment of non-financial assets

The Company assesses at each balance sheet date whether there is any indication that the long-term equity

investments measured by equity method, investment property, fixed assets, and construction in progress and

intangible assets with finite useful life may be impaired. If there is objective evidence indicating that one or more

events that occurred after the initial recognition of the asset and that event has an impact on the estimated future

cash flows of the financial asset which can be reliably estimated, a financial asset is impaired. Goodwill arising in a

business combination and an intangible asset with an indefinite useful life shall be tested for impairment annually,

irrespective of whether there is any indication that the asset may be impaired. For the purpose of impairment

assessment, goodwill shall be considered together with the related asset groups or sets of asset group allocated with

goodwill should be assessed for impairment at each financial year-end.

If the recoverable amount of the asset groups or set of asset groups is less than the book value, the difference

will be recognized as impairment loss and once an impairment loss is recognized, it shall not be reversed in a

subsequent period. The recoverable amount of an asset is the higher of its fair value subtracted from the cost of

disposal and the present value of the future cash flows expected to be derived from the asset costs of disposal.

The signs of impairment are as follows:

(1) The current market price of an asset substantially declines, exceeding obviously the expected decline caused

by time changes or normal application.

(2) The current or future significant changes in the economic, technical or legal environment of the enterprise

and in the market of an asset shall have adverse impacts on the enterprise.

(3) The improved market rate or other return on investment in the period shall have an effect on the discount

rate used by enterprise to calculate estimated cash flow present value, leading to substantial decline in

recoverable amount of assets.

(4) There is evidence to demonstrate that the assets have already gone obsolescent or its entity has already been

damaged.

(5) the assets have already been or will be left unused, or will stop using, or are under the plan to be disposed in

advance.

(6) the evidences of internal reports demonstrate that economic returns of assets have already been lower or will

be lower than expectations, for example, net cash flow created by assets or operating profit (or loss) realized

by assets are much lower (or higher) than expected amounts.

(7) Other signs to indicate that assets value have already been impaired.





(continued)

16. Goodwill

Goodwill means equity investment cost or the differences between the merger costs and the shareholder’s equity

book value of the combined party under the corporate merger not under the same control.

Goodwill related to subsidiaries shall be presented separately in consolidated financial statements, to joint ventures

or associated companies shall be included in the book value of long-term equity investment.

17. Long-term deferred expenses

The Group’s long-term deferred expenses means mining rights compensations, project maintenance expense and

other expense, which should be undertaken in more than 1 year of amortization period (not including 1 year) of

the current and future periods, the expenses shall be amortized averagely in the benefit period. If the project of

long-term deferred expenses cannot make benefit in the future accounting periods, the unamortized value of the

project will be transferred to the profits or losses for the period.

18. Employee benefits

In the accounting period in which an employee has rendered service to the company, the company shall recognize

the employee benefits payable for that service as a liability, and recorded into related assets or current profit or loss

in accordance with the objects that benefited from the service rendered by employees. Any compensation liability

arising from the termination of employment relationship with employees should be charged to the profit or loss

for the current period.

Mainly include salary, bonus, allowance and subsidy, employee welfare expenses, social insurance cost, public

accumulation fund for housing construction, labour union expenditures, employee education funds and other

expenses associated with service rendered by employees.





(continued)

19. Estimated liability

(1) The recognition principles of the estimated liability: the Company recognizes it as a provision when an

obligation related to an contingency such as reclamation, disposal and environment restoring caused by

mining, external guarantee, pending litigation or arbitration, product quality warranty, downsizing scheme,

loss contract, restructuring obligation and so on satisfy all of the following conditions:

1) The obligation is a present obligation of the Company;

2) It is probable that an outflow of economic benefits from the Company will be required to settle the

obligation;

3) The amount of the obligation can be measured reliably.

(2) The measurement approaches of the estimated liability: the estimated liability is primarily measured

according to the estimated optimal value paid to implement the relevant present obligations considering the

factors such as the risks, uncertainties and currency time values related to the contingencies. If the currency

time value has major effects, the estimated optimal value is determined after the discounting of the relevant

future cash flow. If any change happens to the estimated optimal value during reviewing the carrying

amount of the estimated liabilities on the balance sheet date, the adjustment will be made to the carrying

amount to reflect the current estimated optimal value.





(continued)

20. Special reserves

(1) Provision for production maintenance and production safety expenses

Pursuant to the rules and regulations jointly issued by Ministry of Finance, State Administration of Coal

Mine Safety and related government authorities in PRC, the Company has to accrue for production

maintenance expenses (Wei Jian Fei) at RMB6 per ton of raw coal mined, which is used to maintain

production and technical improvement of coal mines. The Company also accrues for production safety

expenses at RMB8 per ton raw coal mined (standards for the Company’s subsidiary Shanxi Heshun Tianchi

Energy Company Limited is RMB15 per ton raw coal mined) and is used for purchase of coal production

equipment and safety expense of coal mining structure.

In accordance with the regulations of “the Interim Measures of financial management of costs of safety in

the high-risk industries and enterprises” (Caiqi [2006] No. 478) of the Ministry of Finance and the State

Administration of Work Safety, as the subsidiaries of the Group, Hua Ju Energy has a commitment to incur

Work Safety Cost at the rate of: 4% of the sales income for the year below RMB10 million; 2% of the actual

sales income for the year between RMB10 million and RMB100 million (included); 0.5% of the actual sales

income for the year between RMB100 million and RMB1 billion (included); 0.2% of the actual sales income

for the year above RMB1 billion.

The above accrued amounts, which have been charged in cost and unused, shall be presented separately

in special reserves of shareholder’s equity. Production safety expenses, which belong to cost of expenses,

directly offset the special reserves. The accrued production safety expenses, which is used by enterprises

and formed into fixed assets, shall be charged in “construction in progress”, and recognised as fixed asset

when safety project is completed and reaches the expected operation condition; meanwhile, offset the special

reserves according to the cost forming into fixed asset, and recognise the same amount of accumulated

depreciation. This fixed asset shall no longer accrue depreciation in the following period.

(2) Shanxi coal mines switching to other business development fund

Pursuant to Shanxi Coal Mine Switching to Other Business Development Fund Provision and Use

Management Methods (Pilot) (Jinzhengfa [2007] No.40), since May 1, 2008, the subsidiary Shanxi

Heshun Tianchi Energy Co., Ltd. accrues RMB5 per ton ROM for Coal Mine Switching to Other Business

Development Fund.

(3) Shanxi environment management guarantee deposit

Pursuant to Notice of Provision and Use Management Method of Shanxi Coal Mine Environment

Rehabilitation Management Guarantee Deposit (Pilot) (Jinzhengfa [2007] No.41) issued by Shanxi

Provincial People’s Government, the subsidiary Shanxi Heshun Tianchi Energy Co., Ltd. Accrues RMB10

per ton ROM for the Environment Rehabilitation Management Guarantee Deposit since May 1, 2008. The

provision and use of the deposit will abide by the following principals of “owned enterprises, used only for

special purpose, saved in special account and supervised by government”.





(continued)

21. The Principles of Revenue recognition

The business revenues are generated mainly from sales of goods, rendering of services and alienating the right to

use assets. The principles of revenue recognition are as follows :

(1) Revenue from sales of goods:

Revenue is recognized when the Company has transferred to the buyer the main risks and rewards of

ownership of the goods, neither retains continuing management usually associated with ownership nor

effectively controls over the goods sold, and the amount of revenue can reliably measured, the associated

economic benefits are likely to flow into the enterprise, and the related to costs incurred can be reliably

measured.

(2) Revenue from rendering of services:

When the provision of services is started and completed within the same accounting year, revenue is

recognized at the time of completion of the services. When the provision of services is started and completed

in different accounting years and the outcome of a transaction involving the rendering of services can be

estimated reliably, revenue is recognized at the balance sheet date by the use of the percentage of completion

method.

(3) Revenue from alienating the right to use assets

The revenue is recognized when the Company has received the economic benefits associated with the

transaction, and can reliably measure the relevant amount of revenue.

22. Government grants

Government grants are recognized when there is reasonable assurance that the grants will be received and the

Group is able to comply with the conditions attaching to them. Government grants in the form of monetary assets

are recorded based on as the amount received, whereas quota subsidies are measured as the amount receivable.

Government grants in the form of non-monetary assets are measured at fair value or nominal amount (RMB1) if

the fair value cannot be reliably obtained.

Government grants received in relation to assets are recorded as deferred income, and recognised evenly in the

income statement over the assets’ useful lives. Government grants received in relation to revenue are recorded as

deferred income, and recognised as income in future periods as compensation when the associated future expenses

or losses arise; or directly recognised as income in the current period as compensation for past expenses or losses.





(continued)

23. Deferred income tax assets and liabilities

The deferred income tax assets and liabilities are recognized based on the differences arising from the difference

between the carrying amount of an asset or liability and its tax base (temporary differences). For any deductible

loss or tax deduction that can be deducted the amount of the taxable income the next year according to the

taxation regulations, the corresponding deferred income tax asset shall be determined considering the temporary

difference. On the balance sheet date, the deferred income assets and deferred income tax liabilities shall be

measured at the tax rate applicable to the period during which the assets are expected to be recovered or the

liabilities are expected to be settled.

An enterprise shall recognize the deferred income tax liability arising from a deductible temporary difference

to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted

from the deductible temporary difference. For the recognized deferred income tax asset, if it is unlikely to obtain

sufficient taxable income to offset against the benefit of the deferred income tax asset, the carrying amount of the

deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it

becomes probable that sufficient taxable income will be available.

24. Leases

The Company classifies the leases into financial lease and operating lease on the lease beginning date.

Financial lease is a lease that substantially transfers all the risks and rewards incident to ownership of an assets. On

the lease beginning date, as the leaseholder, the Company recognizes the lower of fair value of lease assets and the

present value of minimum lease payment as financial leased fixed assets; recognizes the minimum lease payment

as long-term payable, and recognizes the difference between the above two as unverified financing costs.

Operating lease is the other lease except financial lease. As the leaseholder, the Company records lease payments

into the related assets cost or the profit or loss for the period on a straight-line basis over the lease term and;

records lease income into revenue in the income statement on a straight-line basis over the lease term.





(continued)

25. Accounting calculation of the income tax

The accounting calculation of the income tax adopts the balance sheet liabilities approach. The income taxes

include the current and deferred income tax. The current income tax and deferred income tax expenses and

earnings are recorded into the current profit and loss, except those related to the transactions and events are

recorded directly into the shareholder’s equity and the deferred income tax is adjusted into the carrying amount of

goodwill arising from the business combination.

The current income tax expense is the income tax payable, that is, the amount of the current transactions and

events calculated according to the taxation regulations paid to the taxation authorities by the enterprises. The

deferred income tax is the difference between the due amounts of the deferred income tax assets and liabilities to

be recognized according to the balance sheet liabilities approach in the period end and the amount recognized

originally.

26. Segment reporting

Reportable segments are identified based on operating segments which are determined based on the structure

of the Group’s internal organization, management requirements and internal reporting system. An operating

segment is a component of the Group that meets the following respective conditions:

(1) Engage in business activities from which it may earn revenues and incur expenses;

(2) Whose operating results are regularly reviewed by the Group’s management to make decisions about

resource to be allocated to the segment and assess its performance; and

(3) For which financial information regarding financial position, results of operations and cash flows are

available.





(continued)

27. Operation Method of Hedges Business

The Group’s overseas subsidiaries use derivative financial instruments such as forward foreign exchange contracts,

coal swap contracts, interest rate swaps contracts to hedge cash flow for foreign exchange risks, fluctuations in coal

prices and interest rate risk.

The relationship between hedging instrument and hedged item is recorded by the Group on hedging transaction

date, including the target of risk management and various hedging transaction strategies. The Group will regularly

assess whether the derivatives can continuously and effectively hedge cash flows of the hedged item during the

period of hedging transactions. The Group uses the comparative method of the principle terms of the contract to

do the expected evaluation on the effectiveness of hedging, and uses ratio analysis method to do the retrospective

evaluation on the effectiveness of hedging at the end of the reporting period.

Net amounts receivable or payable of hedging transactions is recorded into the balance sheet as assets or liabilities

from hedging transaction date. The unrealized gain or loss shall be recorded into hedging reserve under equity.

The change of fair values of forward foreign currency contract, coal swap contract or interest swap contract shall

be recognized through hedging reserve until the expected transactions occur. Accumulated balance in equity shall

be included in the income statement or be recognized as part of the cost in relation of its assets.

When a hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the

criteria for hedge accounting, the hedge accounting shall not be applicable. Accumulated gain or loss of hedging

instruments is recorded in the equity and recognized when transaction happens. Accumulated gain or loss, which

is recorded in shareholder’s equity, shall be transferred in the profit or loss for the period if transaction is not

expected to make.





(continued)

28. Business combinations

A business combination is a transaction or event that brings together of separate enterprises into one reporting

entity. The Company recognizes the assets and liabilities arising from the business combinations at the

combinations date or acquisition date. Combinations date or acquisition date is the date on which the absorbing

party effectively obtains control of the party being absorbed.

(1) Business combinations involving enterprises under common control: Assets and liabilities that are obtained

by the absorbing party in a business combination are measured at their carrying amounts at the combination

date as recorded by the party being absorbed. The difference between the carrying amount of the net assets

obtained and the carrying amount of the consideration paid for the combination is adjustment to capital

reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against

retained earnings.

(2) Business combinations not Involving enterprises under common control: The cost of combination for a

business combination not involving enterprises under common control is the aggregate of the fair values,

at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by

the acquirer. Where the cost of a business combination exceeds the acquirer’s interest in the fair value

of the acquiree’s identifiable assets, liabilities and contingent liabilities acquired, the difference shall be

recognized as goodwill. Where the cost of combination is less than the acquiree’s interest in the fair value of

the acquiree’s identified assets, liabilities and contingent liabilities acquired, after the reviewing, the acquirer

shall recognize the remaining difference immediately in profit or loss for the current period.





(continued)

29. Preparation methods for consolidated financial statements

(1) The consolidated scope recognition principles: the Company takes the subsidiaries owning the actual

controlling power and the main bodies for the special purpose into the scope of the consolidated financial

statements.

(2) The accounting methods introduced in the consolidated financial statements: The consolidated financial

statements are prepared pursuant to Enterprises accounting criteria No.33-consolidated financial statements

and relevant provisions. All major inter-segment transactions, balances, income and expenses in the

consolidation scope are eliminated in full on consolidation. Unrealized loss from inter-segment transactions

shall, if there is evidence that the loss is part of the related impairment, be recognized in full. Shareholder’s

equity in the net assets of consolidated subsidiaries is identified separately from the Group’s equity therein.

If the losses to the minority shareholders exceed their shares in the subsidiary’s equity, in addition to the part

that minority shareholders have an obligation to bear according to the articles of association or agreement

and the minority shareholders have the ability to bear, the remaining part shall offset the shareholders’

equity attributable to the parent company. If the subsidiary subsequently reports profits, all profits are

attributable to shareholders’ equity of the parent company before compensating the losses to the minority

shareholders which were borne by the shareholders’ equity of the parent company.

If any conflicts between the accounting policies or the accounting period introduced in the subsidiaries and

those of the Company, the necessary adjustment shall be made to the financial statements of the subsidiaries

according to the accounting policies or the accounting period in the Company during the preparation of the

consolidated financial statements.

For those subsidiaries acquired not under common control, some few financial statements are adjusted

based on the fair values of the identifiable net assets after the acquisition date in preparing consolidated

financial statements. For those subsidiaries acquired under common control, which are considered to

be existed at the opening of the consolidation period, the assets, liabilities, the operating results and cash

flows from the opening of the consolidation period are presented in the consolidated financial statement

according to the original carrying amounts.





(continued)

30. Common control operation

There is common control operation in overseas subsidiaries of the Company. Common control operation means

that a company uses its assets or other economic resources with other cooperative parties to jointly do coal

exploration, development, operation, or other economic activities, and jointly control these economic activities in

accordance with contracts or agreements.

The overseas subsidiaries are entitled to the profits created by joint controlled assets as per the shares controlled by

them, and they shall recognize revenue and costs in relation to common control operation in light of contracts or

agreements.

31. Significant accounting policies and accounting estimates

When use the above mentioned accounting policies and accounting estimate, because of the uncertainty of

operation, the Group needs to apply the judgments, estimates and assumptions to book value of inaccurate

measured items, which was made on the basis of experiences of the management and consideration of other

related factors. However, the actual conditions are possibly different from the estimates.

The Group makes regulatory check on above mentioned judgments, estimates and assumptions. The Company

confirms the influences of the accounting modifications in the current and future of the modification time,

dependently.

On balance sheet date, the key assumptions and the uncertainties leading to the possible major adjustments for the

carrying amounts of the assets, liabilities in the future are as follows:





(continued)

31. Significant accounting policies and accounting estimates (continued)

(1) Depreciation and amortization

Fixed assets and intangible assets are depreciated and amortized on the straight-line or production basis

over their useful lives. The Group shall regularly review the useful lives and economically recoverable coal

reserves to determine the total amount of depreciation and amortization which will be included in each

period. Useful lives are calculated on the basis of the experience from similar assets and expected change

of technology. Economically recoverable coal reserves are calculated by the economically recoverable coal

resources based on actual measurement. If the past estimates change significantly, the depreciation and

amortization shall be adjusted during future periods.

Estimates of coal reserves are involved in subjective judgment, because the estimating technology is

inaccurate, so the coal reserves are only approximate value. The recent production and technology

documents shall be considered for the estimates of economically recoverable coal reserves which will be

updated regularly, the inherent inaccuracy of technical estimating exists.

(2) Land subsidence, restoration, rehabilitation and environmental obligations

The Company needs to relocate the villages on the surface due to the underground coal mining, and bear the

cost of relocation of villages, ground crops (or attachments) compensation, land rehabilitation, restructuring

and environmental management and other obligations. The performance of obligation is likely to lead to

outflow of resources, when the amount of the obligation can be measured reliably, it is recognized as an

environmental reclamation obligations. Depending on the relevance with the future production activities

and the reliability of the estimated determination, the flow and non-flow reclamation provision should be

recognized as the profit and loss for the period or credited to the relevant assets.

After taking into account existing laws and regulations and according to the past experience and the best

estimate of future expenditures, management determines Land subsidence, restoration, rehabilitation and

environmental obligations. If the time value of money is material, the expected future cash outflows will be

discounted to its net present value. Following the current coal mining activities and under the condition

that the future impact on land and the environment has become evident, Land subsidence, restoration,

rehabilitation and environmental costs may be amended from time to time. Discount rate used by the Group

may change due to assessment on the time value of money market and debt specific risks, when the estimate

of the expected costs changed, it will be adjusted accordingly by the appropriate discount rate.





(continued)

31. Significant accounting policies and accounting estimates (continued)

(3) Impairment of non-financial long-term assets

As described in note 4 (16), at the date of the balance sheet the Group assesses impairment of non-financial

assets to determine whether the recoverable amount of assets fell less than its carrying value. If the carrying

value of the asset exceeds its recoverable amount, the difference is recognized as impairment loss.

The recoverable amount is the higher between the net amounts of fair value of the assets (or assets group)

less disposal costs and the estimated present value of future cash flow of the assets (or assets group). As

the Group cannot reliably access the open market price of the assets (or asset group), it is not reliable and

accurate to estimate the fair value of assets. When estimating the present value of future cash flows, the

company needs to make significant judgments on the future useful life, the product yield, price, the related

operating costs of the assets (or assets group) and the discount rate used for calculating the present value.

When estimating the recoverable amount, the Group will use all possibly available information, including

the product yield, price from the reasonable and supportable assumption and the forecast related to

operating costs.

(4) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating

units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the

future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to

calculate the present value. Expectation has been determined based on past performance and management’s

expectations for the market development.



V. CHANGE OF ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND

CORRECTION OF EARLY ERRORS

1. Changes of accounting policies and the impact

During the reporting period, the Group made no changes in accounting policies.

2. Changes in accounting estimates

As approved at the fourteenth meeting of the forth session of Board of the Company, all the subsidiary coal mines

of the Company should apply unit of production method on the amortization of mining rights fees from January

1, 2010. That is to say, the amortization of mining rights fees should be based on the economic coal reserves.

The company applied the straight-line balance method on the mining right fees in the previous periods. The

Company believes that unit of production method much more reflects the amortized pattern of this type of reserve

consumption. In 2010, it caused a decrease of cost by RMB14.91 million, an increase of total profit by RMB14.91

million, an increase of income tax by RMB0.7 million and an increase of net profit by RMB14.21 million.

3. Amendments of significant errors and the impact

During the reporting period, the Group made no amendments of significant accounting errors.

VI. TAXES

1. The major tax categories and tax rate applicable to the Group and domestic subsidiaries are as follows:

(1) Income tax

Income tax is calculated at 25% of the total assessable income of the subsidiaries of the Group that registered

in PRC.

(2) Value added tax

The value added tax is applicable to the product sales income of the Company and domestic subsidiaries.

The value added tax is paid at 17% of the corresponding revenue on coal and other commodities sales,

except for the value added tax on revenue from heating supply is calculated at 13%. The value added tax

payable on purchase of raw materials and so on can off sets the tax payable on sales at the tax rate of 17%,

13%, 7%, 3%. The value added tax payable is the balance between current tax payable on purchase and

current tax payable on sales.

Pursuant to State Council Regulation No.538 “PRC Value Added Tax Temporary Statute” (Revised), value

added tax paid for the purchase of machinery and equipments can offset the tax payable on sales from

January 1, 2009.



VI. TAXES (continued)

(2) Value added tax (continued)

Pursuant to the Document (Caishui [2006] No.139) which was jointly issued by the Ministry of Finance and

the State Administration of Taxation, the coal product export refund tax preferential was cancelled and the

value added tax export refund rate was 0%.

According to the approval of “Ji Guo Shui Liu Pi Zi (2010) Document No.1 of State Administration of

Taxation in Jining City”, as the subsidiary of the Company, Hua Ju Energy adopts the taxation policy of levy

and refund 50% on VAT of electricity power and heating.

(3) Business tax

Business tax is applicable to coal transportation service income of the Group and domestic subsidiaries.

Business tax is paid at the 5% of the corresponding revenue, except the business tax on revenue from coal

transportation service is calculated at 3%.

(4) City construction tax & education fee

Subject to all taxes applicable to domestic enterprise according to the “Reply Letter to Yanzhou Coal Mining

Co., Ltd.” issued by State Administration of Taxation (Guoshuihan [2001] No.673), city construction tax and

education fee are still calculated and paid at 7% and 3%, respectively, on the total amount of VAT payable

and business tax payable.

(5) Resource tax

Pursuant to the “Notice of the adjustment of resource tax amount of Shandong province” (Caishui [2005]

No.86), which was jointly issued by the Ministry of Finance and the State Administration of Taxation,

resource tax in Shandong province is calculated and paid at the amount of RMB3.60 per tonne.

Meanwhile, pursuant to the “Notice of the adjustment of resource tax amount of Shanxi province” (Caishui

[2004] No.187), which was jointly issued by the Ministry of Finance and the State Administration of

Taxation, resource tax of Shanxi province is calculated and paid at the amount of RMB3.20 per tonne of raw

coal.

Resource taxes of the Group and domestic subsidiaries thereof are paid as the total of sold raw coal tonnes

plus received raw coal multiplying applicable tax rate.



VI. TAXES (continued)

(6) Real estate tax

The tax calculation is based on the 70% of original value of real estate of the Group and domestic

subsidiaries thereof with the applicable tax rate of 1.2%.

2. Main taxes and rates applicable to the company and subsidiaries thereof as following:

Taxes Taxation basis Rate

Income tax (note) Taxable income 30%Goods and services tax Taxable added value 10%Fringe benefits tax Salary and wages 4.75%-9%Resource tax Sales revenue of coal 7%-8.2%

Note: Income tax for overseas subsidiaries of the Company is calculated at 30% of the total income. Yancoal Australia Pty

Limited (as referred to “Yancoal Australia Pty) and its 100% owned Australian subsidiaries are a taxation consolidated

group pursuant to the rules of taxation consolidation in Australia. Yancoal Australia Pty is responsible for recognizing

the current taxation assets and liabilities for the taxation consolidated group (including deductible loss and deferred

taxation assets of subsidiaries in the taxation consolidated group). Each entity in the tax consolidated group recognizes its

own deferred tax assets and liabilities.



VII. BUSINESS COMBINATIONS AND CONSOLIDATED FINANCIAL STATEMENTS

i. Subsidiaries

Name of Place of Registered Business Investment Equity held Voting right held subsidiaries registration capital scope capital by the company by the company

I. Subsidiaries established by investmentQingdao Free Trade Zone Qingdao, Shandong RMB2,100,000 Trade and storage RMB2,710,000 52.38% 52.38% Zhongyan Trade Co., Ltd in free trade zoneYanzhou Coal Mining Yulin Yulin, Shaanxi RMB1,400,000,000 Production and RMB1,400,000,000 100.00% 100.00% Neng Hua Co., Ltd sales of methanol and acetic acidYancoal Australia Pty Limited Australia AUD 64,000,000 Investment and RMB403,280,000 100.00% 100.00% shareholdingAustar Coal Mine Pty Limited. Australia AUD 64,000,000 Coal mining RMB403,280,000 100.00% 100.00% and salesYanmei Heze Neng Hua Co., Ltd Heze, Shandong RMB3,000,000,000 Coal mining RMB2,924,340,000 98.33% 98.33% and salesYanzhou Coal Mining Inner Mongolia RMB500,000,000 Production and RMB500,000,000 100.00% 100.00% Ordos Neng Hua Co., Ltd sales of methanol (600,000 tons)

II. Subsidiaries acquired under common controlYankuang Shanxi Neng Hua Co., Ltd Jinzhong, Shanxi RMB600,000,000 Thermoelectricity RMB508,210,000 100.00% 100.00% investment, coal technology serviceShanxi Heshun Tianchi Jinzhong, Shanxi RMB90,000,000 Intensive process RMB73,180,000 81.31% 81.31% Energy Co., Ltd of coal productShanxi Tianhao Chemicals Co., Ltd Xiaoyi, Shanxi RMB150,000,000 Production and RMB149,790,000 99.89% 99.89% sales of methanol and coalsShandong Hua Ju Energy Co., Ltd Zoucheng, Shandong RMB288,590,000 Production and RMB766,250,000 95.14% 95.14% sales of thermal power and comprehensive utilization of waste heat

III. Subsidiaries acquired not under common controlShandong Yanmei Shipping Co., Ltd. Jining, Shandong RMB5,500,000 Freight transportation RMB10,570,000 92.00% 92.00% and coal salesFelix Resources Ltd Australia AUD446,410,000 Exploring and AUD3,354,180,000 100.00% 100.00% extracting coal resourcesInner Mongolia Yize Ordos RMB136,260,000 Investment RMB179,690,000 100.00% 100.00% Mining Investment Co., LtdInner Mongolia Rongxin Ordos RMB3,000,000 Methanol production RMB4,400,000 100.00% 100.00% Chemicals Co., LtdInner Mongolia Daxin Ordos RMB4,110,000 Industrial gas production RMB6,000,000 100.00% 100.00% Industrial Gas Co., Ltd




(continued)

i. Subsidiaries (continued)

1. Qingdao Free Trade Zone Zhongyan Trade Co., Ltd

Qingdao Free Trade Zone Zhongyan Trade Co., Ltd. (as referred to “Zhongyan Trade’), established in the

end of 1997 with the registration capital of RMB2, 100,000, was financed RMB700, 000 respectively by the

Company, Qingdao Free Trade Huamei Industrial Trade Company (as referred to “Huamei Industrial

Trade”), China Coal Mine Equipment & Mineral Imports and Exports Corporation (hereinafter referred

to as “Zhongmei Company”). In the year 2000, Huamei Industrial Trade withdrew his investment and the

Company and Zhongmei Company hold respectively 52.38% and 47.62% of the total fund after purchasing

the investment of Huamei Industrial Trade. The corporation business licence code is 370220018000118, and

the legal representative is Mr. Fan Qingqi. The company is mainly engaged in the international trade in free

trade zone of Qingdao, product machining, commodity exhibition and storage, and so on.

2. Yanzhou Coal Mining Yulin Neng Hua Co., Ltd

Yanzhou Coal Mining Yulin Neng Hua Co., Ltd (as referred to “Yulin Neng Hua”) was financed and

established by Yulin Neng Hua, Shandong Chuangye Investment Development Co. Ltd, China Hualu

Engineering Co., Ltd in Feb. 2004. Yulin Neng Hua occupied 97% of the total capital of RMB800 million.

In April 2008, Yulin Neng Hua held 100% of equity after assignment of equity from Shandong Chuangye

Investment Development Co., Ltd, China Hualu Engineering Co., Ltd. In May 2008, the Company injected

RMB600 million into Yulin Neng Hua and the registered capital of Yulin Neng Hua reached RMB1.4 billion.

The corporation business license code is 612700100003307, and the legal representative is Mr. Wang Xin.

The company is mainly engaged in the methanol production with the capacity of 600 thousand tons per

year, acetic acid production with the capacity of 200 thousand tons per year and its compatible coal mine,

and the power plant and so on.

3. Yancoal Australia Pty Limited

Yancoal Australia Pty Limited (as referred to “Yancoal Australia Pty”), a wholly owned subsidiary of

the Company, was established in Nov. 2004 with the actual registration capital of AUD 64 million. The

corporation business licence code is 111859119 and it mainly takes responsibility of the activities such as

operations, budget, investment and finance of the company in Australia.

4. Austar Coal Mine Pty Limited

Austar Coal Mine Pty Limited (as referred to “Austar Company”), a wholly owned subsidiary of Yancoal

Australia Pty, was established in Dec. 2004 with the actual registration capital of AUD 64 million. The

corporation business licence code is 111910822, and it is mainly engaged in the coal production, process,

washing and sales and so on in Southland Coal Mine in Australia.




(continued)


5. Yanmei Heze Neng Hua Co., Ltd

Yanmei Heze Neng Hua Co., Ltd (as referred to “Heze Neng Hua”) was established and financed jointly

by the Company, Coal Industry Jinan Design &Research Co., Ltd (as referred to “design institute”) and

Shandong Provincial Bureau for Coal Geology in October, 2002 with the registration capital of RMB600

million, of which, the Company held 95.67%. In July, 2007, Heze Neng Hua increased the registration

capital to RMB1.5 billion, in which, this company held 96.67%. The corporation business license code is

370000018086629, and the legal representative is Mr. Wang Xin. The company is mainly engaged in the

preparation work and the coal sales in Juye Coal field. On May 2010, the Company unilaterally increased

the registration capital of RMB 1.5 billion and the registration capital was increased to RMB 3 billion, in

which the Company held 98.33%. The corporation business license code is 370000018086629, and the legal

representative is Mr. Wang Xin. The company is mainly engaged in the coal mining and coal sales in Juye

Coal Field.

6. Yanzhou Coal Ordos Neng Hua Company Limited

Yanzhou Coal Ordos Neng Hua Company Limited (as referred to Ordos Neng Hua) was established on

December 18, 2009 with registration capital of RMB500 million. The corporation business license code is

152700000024075 (1-1) , and the legal representative is Mr. Wang Xin. The company is mainly engaged in

production and sales of 600,000tons methanol. The project is under preparation stage.

7. Yanzhou Coal Mining Shanxi Neng Hua Co., Ltd

The former of Yanzhou Coal Mining Shanxi Neng Hua Co., Ltd (as referred to “Shanxi Neng Hua”) was

Yankuang Jinzhong Neng Hua Co., Ltd established jointly by Yankuang Group, Yankuang Lunan Fertilizer

Plant in 2002. In Nov. 2006, Yankuang Group and Yankuang Lunan Fertilizer Plant transferred the equities

of Shanxi Neng Hua to this company and thus this company held 100% in the total registration capital of

RMB600 million. The corporation business license code is 140700100002399, and the legal representative is

Mr. Qu Tianzhi. The company is mainly engaged in thermoelectricity investment, mining machinery and

equipment and electronic products sales and the comprehensive development in coal technology service,

and so on.




(continued)


8. Shanxi Heshun Tianchi Energy Co., Ltd

The former of Shanxi Heshun Tianchi Energy Co., Ltd (as referred to “Heshun Tianchi’) was Guyao Coal

Mine found in Heshun County in 1956. In July 2003, Heshun Tianchi was financed and established jointly

by Shanxi Neng Hua, Heshun County State-Owned Assets Managing Co., Ltd and Jinzhong City State-

Owned Assets Managing Co., Ltd with the registration capital of RMB90 million, of which, Shanxi Neng

Hua held equity of 81.31%. Tianchi Coal Field in Heshun has an area of 17.91 km2, the design capacity of

1.20 million tons per year. The Coal Mine was put into operation in Nov. 2006. The corporation business

license code is 40000105861137, and the legal representative is Mr. Ren Yi. The company is mainly engaged

in raw coal exploitation, extensive coal process and other mining products production and sales and so on.

9. Shanxi Tianhao Chemicals Co., Ltd

Shanxi Tianhao Chemicals Co., Ltd (as referred to “Tianhao Chemicals”) was established jointly by six

shareholders of Xiaoyi City Township Enterprise Supplying & Marketing Company, Shanxi Jinhui Coke

Chemical Co., Ltd, Xiaoyi City Jinda Coke Co., Ltd and 3 local natural persons in Jan. 2002 with the

registration capital of RMB10.01 million. In Feb. 2004, Shanxi Neng Hua increased investment to Tianhao

Chemical by RMB60 million, holding 60% equity. In Oct. 2005, the registration capital was raised to

RMB150 million but the equity held by Shanxi Neng Hua was raised to 99.85% because of the withdrawal

of other shareholders. On March 2010, Shanxi Neng Hua acquired 0.04% equity interest held by minorities

of Tianhao Chemicals, now 99.89% equity interest of Tianhao Chemicals was held by Shanxi Neng Hua.

The corporation business license code is 140000100095998, and the legal representative is Mr. Yin Mingde.

The company is mainly engaged in methanol, coke production, development and sales, and inland

transportation service.




(continued)


10. Shandong Hua Ju Energy Co., Ltd

Shandong Hua Ju Energy Co., Ltd. (Hua Ju Energy) was approved by Shandong Economic System Reform

Office in 2002, and established by five share holders, i.e. Yankuang Group, Shandong Chuangye Investment

Development Company, Shandong Honghe Mining Group Co., Limited and Shandong Jining Luneng

Shengdi Electricity Group. Yankuang Group transferred its operational net assets RMB235.94 million,

including Nantun Power Plant, Xinglongzhuang Power Plant, Baodian Power Plant, Dongtan Power Plant,

Xincun Power Plant, Jier Power Plant and Electricity Company, into 174.98 million shares, i.e. 65.80% of the

total shares number in Hua Ju Energy. The other share holders invested currency following the above ration,

and the general capital was 250 million shares. In 2005, Shandong Jining Luneng Shengdi Electricity Group

transferred its equity interest in Hua Ju Energy to Jining Shengdi Investment Management Co., Ltd. In 2008,

Yankuang Group increased 38.59 million shares in Hua Ju Energy with assessed value of land use right of

12 pieces of land. After the increase of capital, the total capital was 288.59 shares, and Yankuang Group held

74% of the total equity interest. In 2009, Yankuang Group transferred all its equity interest in Hua Ju Energy

to the Company, and the other share holders’ capital did not change. In July 2009, the total shares held by

Shandong Chuangye Investment Development Company, Jining Shengdi Investment Management Co., Ltd

and Wu Zenghua were transferred to the Company, and then the shares held by the Company increased to

95.14%. The Business License for Legal Person registered No. of Hua Ju Energy, mainly engaged in thermal

power generation by coal slurry and gangue, sales of electricity on the grid and comprehensive use of waste

heat, is 370000018085042; legal person representative is Zhao Zengyu.

11. Shandong Yanmei Shipping Co., Ltd.

The former of Shandong Yanmei Shipping Co., Ltd. (as referred to “Yanmei Shipping“) was Zoucheng

Nanmei Shipping Co., Ltd established in May 1994 with the registered capital of RMB5.5 Million. The

company name was changed into after “Yanmei Shipping” spent RMB105.7 million purchasing 92% of the

registered capital in 2003, and Shandong Chuangye Investment and Development Co., Ltd. attained the

other 8%. The corporation business license code is 370811018006234, and the legal representative is Mr.

Wang Xinkun. The company is mainly engaged in provincial cargo transportation along the middle and

down streams, branches of Yangtze River.

12. Felix Resources Limited

Felix Resources Limited (“Felix”), at January 1970 in Brisbane, Queensland, Australia, a limited liability

incorporated company mainly engaged in businesses such as coal mining and exploration, company

registration number 000 754 174.

Austar, a subsidiary of the Company, is the registered holder of 196.46 million shares representing 100% of

the issued share of Felix.




(continued)


12. Felix Resources Limited (continued)

(1) As of the reporting period, subsidiaries owned by Felix are as follows:

Registered Registered Business Shares Subsidiaries address capital scope proportion (AUD) (%)

White Mining Limited Australia 3,300,200 Holding company & 100 Coal business managementYarrabee Coal Company Pty Ltd Australia 92,080 Coal mining and sales 100Auriada Limited Northern Ireland 5 No business, to be liquidated 100Ballymoney Power Limited Northern Ireland 5 No business, to be liquidated 100Balhoil Nominees Pty Ltd Australia 7,270 No business, to be liquidated 100SASE Pty Ltd Australia 9,650,564 No business, to be liquidated 90Athena Coal Pty Ltd Australia 2 Coal exploration 100Proserpina Coal Pty Ltd Australia 1 Coal mining and sales 100White Mining Services Pty Limited Australia 2 No business, to be liquidated 100Tonford Pty Ltd Australia 2 Coal exploration 100Moolarben Coal Operations Pty Ltd Australia 2 Coal business management 100Moolarben Coal Mines Pty Limited Australia 1 Coal business development 100Ashton Coal Operations Pty Limited Australia 5 Coal business management 100White Mining (NSW) Pty Limited Australia 10 Coal mining and sales 100UCC Energy Pty Limited Australia 2 Ultra Clean Coal Technology 100Agrarian Finance Pty Ltd Australia 2 No business, to be liquidated 100Advanced Clean Coal Australia 0 No business, to be liquidated 100 Technology Pty LimitedWhite Mining Research Pty Limited Australia 2 No business, to be liquidated 100Felix NSW Pty Limited Australia 2 Port investment 100Moolarben Coal Sales Pty Ltd Australia 2 Coal sales 100

(2) Although Felix holds more than 50% stake in the joint venture, it is not included in the merger:

Subsidiary of Felix, White Mining Limited, holds 60% shares of Australian Coal Processing Holding

Pty Ltd. Pursuant to the shareholders agreement of this company, all significant finance and operating

decisions shall be approved by all shareholders. So the Group has 33.33% voting shares in Australian

Coal Processing Holding Pty Ltd, which is not included in the consolidation because of no control

over it.

Subsidiary of Felix, White Mining Limited, holds 60% shares of Ashton Coal Mines Limited. Pursuant

to the shareholders agreement of this company, all significant finance and operating decisions shall be

approved by all shareholders. So the Group has 33.33% voting shares in Ashton, which is not included

in the consolidation because of no control over it.




(continued)


12. Felix Resources Limited (continued)

(3) Jointly controlled entities of Felix

Interests Entities Address Main business proportion (%)

Boonal Joint Venture Australia Coal transportation and equipments 50Athena Joint Venture Australia Coal exploration 51Ashton Joint Venture Australia Coal mine development and operation 60Moolarben Joint Venture Australia Coal mine development and operation 80

13. Inner Mongolia Yize Mining Investment Company Limited

Inner Mongolia Yize Mining Investment Company Limited (as referred to Yize Company) is invested by

Guangjing Investment Company Limited (a subsidiary of Hong Kong Jiantao Chemicals Group) which

was established in November 2004 with registered capital of RMB 136.2605 million. In April 2010, the

Ordos Neng Hua, a subsidiary of the Company, purchased Yize Company, after which, Yize Company

has become a wholly-owned subsidiary of the Ordos Neng Hua. The corporation business license code

is 150000400000390, and the legal representative is Mr. Wang Xin. The company is mainly engaged in

investment on mining and chemicals projects, public projects, water and electricity supply, waste water

treatment and so on.

14. Inner Mongolia Rongxin Chemicals Company Limited

Inner Mongolia Rongxin Chemicals Company Limited (as referred to Rongxin Company) is invested by

Inner Mongolia Qisheng Mining Company Limted (a subsidiary of Hong Kong Jiantao Chemicals Group)

which was established on July 2008 with registration capital of RMB 3 million. In April 2010, Ordos

Neng Hua, a subsidiary of the Company, purchased Rongxin Company, after which, Rongxin Company

has become a wholly-owned subsidiary of Ordos Neng Hua. The corporation business license code is

152722000005151, and the legal representative is Mr. Wang Xin. The company is mainly engaged in

methanol production and sales.

15. Inner Mongolia Daxin Industrial Gas Company Limited

Inner Mongolia Daxin Industrial Gas Company Limited (as referred to Daxin Company) is jointly invested

by Mingsheng Investment Company and Inner Mongolia Qisheng Mining Company Limited which are all

the subsidiaries of Hong Kong Jiantao Chemicals Group in August 2008, with registered capital of RMB

4.11 million. In April 2010, Ordos Neng Hua, a subsidiary of the Company, purchased Daxin Company,

after which, Daxin Company has become a wholly-owned subsidiary of Ordos Neng Hua. The corporation

business license code is 150000400002131, and the legal representative is Mr. Wang Xin. The company is

mainly engaged in industrial gas supplies.




(continued)

ii. The changes of consolidation scope for the period

1. Companies newly included in the consolidation

Net assets at Net profits Reason for Shares the end of at the end of Companies consolidation proportion (%) current period current period

Inner Mongolia Yize Mining Acquisition of shares 100.00 179,540,000 -5,460,000 Investment Co., LtdInner Mongolia Rongxin Acquisition of shares 100.00 -350,000 -3,350,000 Chemicals Co., LtdInner Mongolia Daxin Acquisition of shares 100.00 420,000 -1,680,000 Industrial Gas Co., Ltd

2. Companies excluded in the consolidation Currency: AUD

Net profits from Net assets on 1 January 2010 30 December to 30 December Reason for Shares 2010 2010Companies non-consolidation proportion (%) (Disposal Date) (Disposal Date)

Minerva Joint Venture Disposal of share 51.00 144,819,460 107,976,085Felix Coal Sales Pty Ltd Disposal of share 100.00 909,932 -472,359Minerva Mining Pty Ltd Disposal of share 100.00 2,664,066 -1,918,676Minerva Coal Pty Ltd Disposal of share 51.00 -1,992,775 604,108

Among which, the following subsidiaries are lost control and excluded due to the disposal of equity interest

for the year:

Subsidiaries Disposal date

Minerva Joint Venture December 2010Felix Coal Sales Pty Ltd December 2010Minerva Mining Pty Ltd December 2010Minerva Coal Pty Ltd December 2010

Note: On 20th December 2010, Felix Resources Limited, the subsidiary of Yancoal Australia, engaged into an agreement

with a subsidiary of Sojitz in Australia, under which the 51% equity interest of Minerva Joint Venture and the

equity interest of relevant subsidiaries were disposed to the subsidiary of Sojitz in Australia. The transaction

was entered into as a result of exercising pre-emptive rights by Sojitz Corporation pursuant to the relevant joint

venture agreement, which was entered into prior to the Company’s acquisition of Felix Resources Ltd. Before 31

December 2010, the transaction has been approved at the seventeenth meeting of the fourth session of the board

and has been registered at the Austrilia Securities & Investments Commission. The total amount of the transaction

was AUD191.85 million, out of which the disposed net assets of Minerva Joint Venture and relevant subsidiaries

amounted to AUD146.4 million, the goodwill was AUD27.09 million. The transaction realized an investment

income of AUD18.36 million.




(continued)

iii. Combination in current period

1. Subsidiaries acquired in business combination under un-common control

Name of Place of Registered Investment Equity held subsidiaries Registration capital capital by the Company Business scope

Inner Mongolia Yize Mining Ordos RMB136,260,000 RMB179,690,000 100.00% investment Investment Co., LtdInner Mongolia Rongxin Ordos RMB3,000,000 RMB4,400,000 100.00% methanol production Chemicals Co., LtdInner Mongolia Daxin Ordos RMB4,110,000 RMB6,000,000 100.00% industrial gas production Industrial Gas Co., Ltd

(1) The acquisition information related to Yize Mining, Rongxin Chemicals and Daxin Industrial Gas

is described in note “VII (I) 13, 14 and 15”. The consideration for acquisition has been paid and

the procedures for the transfer of the equity interest have been completed on 16 April 2010.The

acquisition date of Yize Mining, Rongxin Chemicals and Daxin Industrial Gas by the Group was 16

April 2010. From 16 April 2010 to 30 April 2010, because financial data of Yize Mining, Rongxin

Chemicals and Daxin Industrial Gas did not change significantly, financial information of acquisitions

on 30 April 2010 shall prevail.

(2) The identifiable assets and liabilities at the acquisition date:

April 30, 2010 The The The Carrying identifiable Carrying identifiable Carrying identifiable amounts fair value amounts of fair value amounts fair valueItems of Yize of Yize Rongxin of Rongxin of Daxin of Daxin (RMB) (RMB) (RMB) (RMB) (RMB) (RMB)

Prepayment 10,500,000 10,500,000 – – – –Other receivables – – 3,000,000 3,000,000 2,100,000 2,100,000Inventories 10,000 10,000 – – – –Net value of fixed assets 2,340,000 4,750,000 – – – –Construction in progress 8,510,000 – – – – –Intangible assets 100,140,000 179,980,000 – – – –Long-term differed expenses 7,420,000 7,420,000 – – – –Other payables 17,670,000 17,670,000 – – – –Net assets attributable to the shareholders of the parent company 111,250,000 184,990,000 3,000,000 3,000,000 2,100,000 2,100,000

Note: As above, fair value of the identifiable assets, liabilities of Yize, Rongxin and Daxin is determined on the

basis of the evaluation report issued by Shandong Zhenyuan Hexin Assets Appraisal Co., Ltd on 20 October

2009.




(continued)

iii. Combination in current period (continued)

1. Subsidiaries acquired in business combination under un-common control (continued)

(3) The total acquisition consideration is RMB190.09 million, which is in line with the total identifiable

fair value of Yize, Rongxin and Daxin.

(4) The operation conditions after acquisition date

Items 30 April 2010-31 December 2010

Operating revenue –Net profit RMB-10,490,000Net cash flow generated from operating activities RMB146,530,000Net cash flow RMB4,060,000

iv. Translation of financial statements denominated in foreign currency

Translation exchange rates of overseas subsidiaries’ financial statements

Items Foreign currency Translation exchange rates

Assets and liabilities AUD spot exchange rate on balance sheet date 6.7139The income statement AUD approximate spot exchange rate on and cash flow statement transaction date, average of the year 6.4217The equity AUD spot exchange rate on arising, except for undistributed profits



VIII. NOTES TO CONSOLIDATION FINANCIAL STATEMENTS

1. Bank balance and cash

At December 31, 2010 At January 1, 2010 Original Exchange RMB Original Exchange RMBItems currency rate equivalent currency rate equivalent

Cash on handIncluding: RMB 483,056 1.0000 483,056 287,697 1.0000 287,697

USD 20,264 6.6227 134,202 18,264 6.8282 124,710AUD 10,531 6.7139 70,704 12,071 6.1294 73,988

Subtotal 687,962 486,395

Cash in bankIncluding: RMB 7,168,812,301 1.0000 7,168,812,301 9,951,930,620 1.0000 9,951,930,620

USD 56,078,834 6.6227 371,393,294 107,640,772 6.8282 734,992,719AUD 189,332,602 6.7139 1,271,160,157 172,311,849 6.1294 1,056,168,247HKD 7,124,320 0.8509 6,062,084 8,300,605 0.8805 7,308,683EUR 25,178 8.8065 221,730 50,863 9.7971 498,310GBP 1,040 10.2182 10,627 895 10.9780 9,825

Subtotal 8,817,660,193 11,750,908,404

Other monetary assetsRMB 534,714,566 1.0000 534,714,566 97,512,360 1.0000 97,512,360USD 5,416,460 6.6227 35,871,590 30,056,886 6.8282 205,234,429AUD 208,713,939 6.7139 1,401,284,515 38,948,276 6.1294 238,729,563Subtotal 1,971,870,671 541,476,352

Total 10,790,218,826 12,292,871,151

(1) As at end of the reporting period, the Group held 4,018.91 million of the limited amounts, including

RMB2,033.3 million of term deposits; RMB34.04 million of letter of credit deposit; RMB534.42 million of

guarantee contract with priority to transfer money; RMB30.45 million of environmental margin; RMB 98.6

million of other margin; and RMB1,288.1 million of cash arising from disposal of equity of Minerva and its

subsidiaries.

(2) In 2009, Felix got AUD383.33million of financial credit line including borrowing, financial leasing, etc from

the syndication of bank, which is cross-guaranteed by Felix and its subsidiaries, Felix held its main assets

as collateral including the assets of Minerva. According to agreement, RMB1,288.10 million of the received

cash from disposal of Minerva cannot be used until getting the consents from the bank.

(3) At the end of the current period, overseas bank balance and oversees cash of the Group is RMB2,720.82

million, owned by the subsidiary of the Company.



VIII. NOTES TO CONSOLIDATION FINANCIAL STATEMENTS (continued)

2. Tradable financial assets

(1) Category of tradable financial assets

Fair value at Fair value at the end of the beginningItems the year of the year

Hedging instrument – forward foreign currency contract 239,475,434 37,760,077

Total 239,475,434 37,760,077

Note: To avoid the risk of foreign currency rate fluctuation, overseas subsidiaries of the Company enter into forward

foreign currency contracts to hedge foreign currency risks: to exchange USD into AUD on the agreed date in the

future at the agreed exchange rate range, or the spot rate. At the date of the balance sheet, derivative financial

assets or liabilities reflect the fair value of related outstanding contracts. The fair value will be calculated based on

the difference between the forward foreign currency contract exchange rate on the balance sheet date and on the

contracts signing date.

3. Notes receivable

(1) Notes receivable category

At December 31, At January 1,Notes category 2010 2010

Bank acceptance bills 10,408,903,124 4,990,893,624

Total 10,408,903,124 4,990,893,624

(2) For the current period, notes receivable increase by 109%, mainly due to increase of notes sales modes and

decrease of notes discount.

(3) As at the end of the reporting period, the Group had no discount immature bills.




4. Accounts receivable

(1) Accounts receivable category

At December 31, 2010 At January 1, 2010 Carrying Bad debt Carrying Bad debt amount Provision amount Provision Bad debt Bad debtItems Amount Provision Amount Provision RMB % RMB % RMB % RMB %

Accounts receivables accrued bad debt provision as per portfolio – – – – – – – –Accounting aging portfolio 44,122,701 9 5,406,430 100 32,369,562 7 4,542,547 100Risk-free portfolio 449,053,376 91 – – 408,727,014 93 – –The subtotal of portfolio 493,176,077 100 5,406,430 100 441,096,576 100 4,542,547 100

Total 493,176,077 100 5,406,430 100 441,096,576 100 4,542,547 100

1) There was no the individually significant amounts of accounts receivables accrued the bad debt

provision separately for the period.

2) Accounts receivables in the portfolio accrued the bad debt provisions as per accounting aging analysis

method.

At December 31, 2010 At January 1, 2010Items Amount Bad debt Amount Bad debt RMB % provision RMB % provision

Within 1 year 39,376,735 4 1,575,069 28,930,175 4 1,157,2071 to 2 years 1,306,579 30 391,974 – 30 –2 to 3 years – 50 – 108,094 50 54,047Over 3 years 3,439,387 100 3,439,387 3,331,293 100 3,331,293

Total 44,122,701 – 5,406,430 32,369,562 – 4,542,547

3) Account receivables in the portfolio accruing the bad debt provision in other method

Items Carrying amount Bad debt amount

Risk-free portfolio 449,053,376 –

Total 449,053,376 –

Note: As of the end of the year, accounts receivable in risk-free portfolio included 405.53 million from overseas

subsidiaries of the Company which did not accrue bad debt provision because of claims still in the normal

credit period.





(2) There is no bad debt provision to recover during the reporting period.

(3) There is no write-off of accounts receivables during the reporting period.

(4) Accounts receivables arising on shareholders of the Company holding more than 5% (including 5%) shares

are excluded as at the end of period; accounts receivables arising on related parties was RMB53.53 million,

accounting for 11% of the total accounts receivables. See Note “IX, (3), 2”.

(5) The five largest accounts receivables

Relationship Proportion of with the total accountsCompany name Company Amounts Aging receivables (%)

TS Resources Australia Pty Ltd Third party 64,169,778 Within 1 year 13Korea East West Power Co. Ltd Third party 59,133,332 Within 1 year 12Korea Midland Power Co. Ltd Third party 58,773,360 Within 1 year 12Ashton Coal Mines Limited Joint venture 53,450,049 Within 1 year 11 companyNippon Steel Corporation Third party 52,599,647 Within 1 year 11

Total 288,126,166 59

(6) Balance of foreign currency in accounts receivables

At December 31,2010 At January 1, 2010Foreign Foreign Exchange RMB Foreign Exchange RMBcurrency currency rate equivalent currency rate equivalent

USD 73,531,008 6.6227 486,973,807 53,514,413 6.8282 365,407,115AUD 2,544,595 6.7139 17,084,156 5,957,600 6.1294 36,516,513

Total 504,057,963 401,923,628

(7) There were no accounts receivables terminated to recognize for the year.




5. Prepayments

(1) The aging analysis of prepayments

At December 31,2010 At January 1, 2010Items RMB % RMB %

Within 1 year 242,331,377 100 75,791,833 991 to 2 years 391,194 – 538,240 12 to 3 years 369,866 – 21,434 –Over 3 years 117,734 – 96,300 –

Total 243,210,171 100 76,447,807 100

Note: By the end of the reporting period, prepayment of the Group increased by 218% comparing with the beginning of

the reporting period, mainly because of the prepayment increase of construction and equipments of Heze Neng

Hua and Ordos Neng Hua, subsidiaries of the Company.

Prepayments with aging over 1 year are for equipments, the Group has not made settlement

(2) Main companies of prepayments

RelationshipCompany with thename Company Amounts Age Reasons

Dongfang Boiler(Group), Inc Third party 47,976,000 Within 1 year Goods to arrival, under executingWuxi Huaguang Boiler Co., Ltd. Third party 28,440,000 Within 1 year Goods to arrival, under executingLinde Engineering Hangzhou (LEH) Third party 21,970,000 Within 1 year Goods to arrival, under executingMinmetals Shanghai Third party 21,086,070 Within 1 year Goods to arrival, under executing International Freight Co., LtdShanghai Electric Group Third party 15,200,000 Within 1 year Goods to arrival, under executing Company Limited

Total 134,672,070

(3) Prepayments due from shareholders of the Group holding more than including 5% of the total shares are not

included for the period.




5. Prepayments (continued)

(4) Balance of foreign currency in prepayments

At December 31,2010 At January 1, 2010 Currency Exchange RMB Foreign Exchange RMB currency rate equivalent currency rate equivalent

USD 1,403,411 6.6227 9,294,370 1,094,299 6.8282 7,472,092EUR – – – 317,740 9.7971 3,112,930AUD 2,673,886 6.7139 17,952,203 5,262,249 6.1294 32,254,429

Total 27,246,573 42,839,451

6. Other receivables

(1) The category of other receivables

At December 31,2010 At January 1, 2010 Carrying Bad debt Carrying Bad debt amount Provision amount ProvisionItems RMB % RMB % RMB % RMB %

Accounts receivables accrued bad debt provision as per portfolio – – – – – – – –Accounting aging portfolio 20,405,766 1 16,066,999 100 49,408,758 16 21,853,021 100Risk-free portfolio 3,538,303,612 99 – – 267,896,987 84 – –The subtotal of portfolio 3,558,709,378 100 16,066,999 100 317,305,745 100 21,853,021 100

Total 3,558,709,378 100 16,066,999 100 317,305,745 100 21,853,021 100

Note: During the reporting period, other receivables of the Group increased primarily due to 3,125.75 million

investment prepayment for the current period. See Note “XII, 1, (2) and (3)”.

1) There was no the individually significant amounts of other receivables that accrued the bad debt

provision separately for the reporting period.




6. Other receivables (continued)

(1) The category of other receivables (continued)

2) Other receivables in the portfolio that accrued the bad debt provisions as per accounting aging analysis

method.

At December 31,2010 At January 1, 2010 Amount Bad debt Bad debtItems RMB % provision Amount % provision

Within 1 year 82,892 4 3,316 21,140,430 4 845,6171 to 2 year 5,010,931 30 1,503,279 6,860,982 30 2,058,2952 to 3 years 1,503,078 50 751,539 4,916,474 50 2,458,237Over3 years 13,808,865 100 13,808,865 16,490,872 100 16,490,872

Total 20,405,766 – 16,066,999 49,408,758 – 21,853,021

3) Other receivables in the portfolio accruing the bad debt provision in other method

Items Carrying amount Bad debt amount

Risk-free portfolio 3,538,303,612 –

Total 3,538,303,612 –

Note: As at the end of the period, risk-free portfolio included RMB3,125.75 million of investment prepayment.

(2) There is no bad debt provision to recover during the reporting period.

(3) Other receivables wrote-off during the reporting period.

Arising from Nature of Amounts Reason related partyItems other receivables wrote-off wrote-off transaction

Personal and third-party companies Borrowings, etc 37,221 Unable to No recover in long period

Total 37,221

(4) As at the end of the reporting period, accounts receivable due from the parent company of the Company

is RMB16.89million (at the end of last year: 10.9 million); accounts receivable due from related parties is

RMB160.69million. See note “IX, 3, (3)”.





(5) The five largest other receivables

Relationship ProportionCompany with the of othername Company Amounts Aging receivables (%) Nature or content

Prepayment for investment Third party 3,125,752,800 Within 1 year 88 Prepayment for investmentNewcastle Infrastructure Third party 143,619,861 Within 1 year 4 Borrowings Construction GroupAshton Coal Mines Limited Joint venture company 115,479,966 1to 2years 3 Dealing amountsPrepayment for ocean freight Third party 28,814,117 Within 1 year 1 Ocean freightWICET Holding Company Third party 19,281,891 Within 1 year 1 Borrowings

Total 3,432,948,635 97

(6) Foreign currency balance of other receivables

At December 31, 2010 At January 1, 2010 Foreign Exchange RMB Foreign Exchange RMBCurrency currency rate equivalent currency rate equivalent

AUD 42,890,268 6.7139 287,960,970 26,164,032 6.1294 160,369,818

Total 287,960,970 160,369,818

(7) There are no other receivables terminated to recognise for the reporting period.

7. Inventory and provision for decline in value of inventories

(1) Inventory category

At December 31, At January 1,Items 2010 2010

Raw materials 293,536,949 267,282,543Coal stock 1,263,790,633 570,519,910Methanol stock 10,279,356 27,291,287Low value consumables 78,508,574 21,267,589

Total 1,646,115,512 886,361,329

Note: During the reporting period, the inventory of the Group increased by 86%, mainly due to that Moolarben Coal

Mine, a subsidiary of Yancoal Australia, commissioned and the increase of coal inventory caused by the increase of

external purchased coal by the parent company.




7. Inventory and provision for decline in value of inventories (continued)

(2) No provision for inventory.

(3) Inventory that excludes the amount of capitalized interest.

8. Other current assets and other current liabilities

(1) Other current assets


Land subsidence, restoration, rehabilitation and environment expenses (Note 1) 1,709,871,744 1,288,452,859Removal costs (note 2) 149,351,075 350,675,748Environment management guarantee deposit 254,193,496 226,251,717

TOTAL 2,113,416,315 1,865,380,324

(2) Other current liabilities


Land subsidence, restoration, rehabilitation and environment costs (Note 1) 2,297,502,144 1,560,640,261

TOTAL 2,297,502,144 1,560,640,261

Note 1:

The consequence of coal mining activities is land subsidence caused by the resettlement of the land above the

underground mining sites. Depending on the circumstances, the Company may relocate inhabitants from the land above

the underground mining sites prior to mining those sites or the Company may compensate the inhabitants for losses

or damages from land subsidence after the underground sites have been mined. The management provides reserves

according to the best estimation based on the past experience as they could make on the likely expenditures in the future,

and reverse the accruals after payment.

Considering the time difference between the payment and mining exists, if the accumulated payment is more than the

accruals provided, such excess of payment would be presented under current assets at the year end; if the accumulated

payment is less than the accruals provided, and such shortage of payment would be presented under current liabilities at

the year end.

For the current period, other current liabilities increased by 47%, mainly due to that actual accrued land subsidence,

restoration, rehabilitation and environment costs exceed actual payment.




8. Other current assets and other current liabilities (continued)

(2) Other current liabilities (continued)

Note 2:

Open-pits owned by overseas subsidiaries of the Company shall remove the overburden on the coal seam, which will

result in removal costs. Removal costs shall be recorded as profits or losses when respective coal seam is mined.

9. Available-for-sales financial assets

Fair value at Fair value at December 31, January 1,Items 2010 2010

Available-for-sale equity instruments 194,259,526 264,672,846

TOTAL 194,259,526 264,672,846

(1) Available-for-sale equity instrument, mainly are shares in Shanghai Shenergy Co., Ltd and Jiangsu

Lianyungang Port Co., Ltd listed in Shanghai Stock Exchange, which are held by the Company in the past

years. The above fair value was based on the closing price of Shanghai Stock Exchange on the balance sheet

date.

(2) Available-for-sale financial assets decreased by 27%, which is mainly due to the decreased share price of

available for sale shares.

10. Long-term equity investments

(1) Long-term equity investments


Equity investments under cost method 30,182,550 30,622,550Equity investments under equity method 1,075,708,976 941,237,919

Long-term equity investments-Total 1,105,891,526 971,860,469

Less: provision for impairment – -

Long-term equity investments – Net 1,105,891,526 971,860,469





(2) Under cost method and equity method

Name of Shares Ratio of Original Opening Closing Cashinvestees proportion voting amount balance Addition Decrease balance dividends (%) (%)

Under cost method

Zhejiang Jiangshan Concrete Co., Ltd 0.49 0.49 440,000 440,000 – 440,000 – –

Yankuang Group Zoucheng

Ziyuan Construction Co., Ltd 8.33 8.33 500,000 500,000 – – 500,000 –

Yankuang Group Zoucheng Hua Ming company. 8.00 8.00 100,000 100,000 – – 100,000 –

Yankuang Group Zoucheng Fuhui Company. 16.00 16.00 80,000 80,000 – – 80,000 –

Shenzhen Weiersen Floriculture Co., Ltd - - 100,000 100,000 – – 100,000 –

Yankuang Group Guohong Chemical Co., Ltd 5.00 5.00 29,402,550 29,402,550 – – 29,402,550 –

Subtotal 30,622,550 30,622,550 – 440,000 30,182,550 –

Under equity method

China HD Zouxian Co., Ltd. 30.00 30.00 900,000,000 939,981,410 7,874,551 947,855,961

Yankuang Group Finance Co., Ltd 25.00 25.00 125,000,000 – 127,102,408 127,102,408

Australian Coal Processing Holding Pty Ltd 60.00 33.33 131,274 131,274 – 131,274 –

Ashton Coal Mines Limited 60.00 33.33 1,125,235 1,125,235 – 374,628 750,607

Subtotal 1,026,256,509 941,237,919 134,976,959 505,902 1,075,708,976

Total 1,056,879,059 971,860,469 134,976,959 945,902 1,105,891,526





(3) Investment in joint venture and associated company

Name of Type of Registered Business Registered Shares Ratio of investees company location nature capital proportion voting share (%) (%)

Associated company

China HD Limited Shandong Electricity RMB3 billion 30.00 30.00 Zouxian Co., Ltd. liability energy and related development

Yankuang Group Limited Shandong Finance RMB500 million 25.00 25.00 Finance Co., Ltd liability

Joint venture enterprises

Australian Coal Limited Australia No operating - 60.00 33.00 Processing Holding liability company Pty Ltd (Note) in Australia

Ashton Coal Mines Limited Australia Holding and AUD100 60.00 33.00 Limited (Note) liability sales of real-estate

Total assets Total liabilities Net assets by Name of by the end by the end the end Operating investees of the period of the period of the period revenue Net profit

Associated company

ChinaHD Zouxian Co., Ltd. 6,486,343,756 3,326,823,887 3,159,519,869 4,226,931,709 22,558,501Yankuang Group Finance Co., Ltd 6,144,686,416 5,636,276,785 508,409,631 12,443,120 8,409,632

Joint venture companyAustralian Coal Processing Holding Pty Ltd – – – – -141Ashton Coal Mines Limited 82,500,047 81,446,885 1,053,162 2,029,947,770 -770,212

Total 12,713,530,219 9,044,547,557 3,668,982,662 6,269,322,599 30,197,780

Note: There is difference between shares proportion and voting shares proportion of joint venture enterprises caused

by the items as described in note “VII, 1,12, (2) ”. The Group cannot exercise control over the items, they shall be

recognized under equity method, and the financial data of the joint venture is not included in the consolidated

financial statements of the group.

(4) No impairment occurred in the Company’s long-term equity investment, so no provision was made.




11. Fixed assets

(1) Fixed assets list

At January 1, Exchange gain At December 31, Items 2010 Addition Reversals and loss 2010

Cost price 29,880,489,239 3,873,442,536 967,131,431 465,579,975 33,252,380,319Land 325,916,367 41,773,718 136,099,436 26,787,421 258,378,070Buildings 4,009,412,670 145,424,991 18,055,226 10,281,270 4,147,063,705Mining structure 5,211,165,308 476,027,104 87,366,490 71,049,027 5,670,874,949Ground structure 1,547,477,762 167,193,436 27,397,173 – 1,687,274,025Harbour works and craft 253,677,455 – – – 253,677,455Plant, machinery and equipments 17,677,686,936 2,882,055,709 668,496,462 357,437,684 20,248,683,867Transportation equipment 425,270,137 23,507,478 10,193,847 24,573 438,608,341Others 429,882,604 137,460,100 19,522,797 – 547,819,907

Addition Provision

Accumulated depreciation 12,800,962,022 108,801,216 2,231,619,007 385,362,376 65,554,594 14,821,574,463Land – – – – – –Buildings 1,906,388,909 – 105,611,883 6,242,731 888,897 2,006,646,958Mining structure 1,892,726,503 108,654,786 162,375,189 9,798,557 7,854,892 2,161,812,813Ground buildings 573,205,786 – 163,347,628 4,852,360 – 731,701,054Harbour works and craft 77,467,280 – 5,701,542 – – 83,168,822Plant, machinery and equipments 7,999,798,981 146,430 1,693,672,639 352,654,671 56,790,017 9,397,753,396Transportation equipment 304,585,609 – 41,045,478 9,563,253 20,788 336,088,622Others 46,788,954 – 59,864,648 2,250,804 – 104,402,798

Provision – 97,558,627 – – 97,558,627Land – – – – –Buildings – 15,886,116 – – 15,886,116Mining structure – – – – –Ground buildings – 5,945,342 – – 5,945,342Harbour works and craft – – – – –Plant, machinery and equipments – 75,568,475 – – 75,568,475Transportation equipment – 74,828 – – 74,828Others – 83,866 – – 83,866

Book Value 17,079,527,217 – – – 18,333,247,229Land 325,916,367 – – – 258,378,070Buildings 2,103,023,761 – – – 2,124,530,631Mining structure 3,318,438,805 – – – 3,509,062,136Ground structure 974,271,976 – – – 949,627,629Harbour works and craft 176,210,175 – – – 170,508,633Plant, machinery and equipments 9,677,887,955 – – – 10,775,361,996Transportation equipment 120,684,528 – – – 102,444,891Others 383,093,650 – – – 443,333,243




11. Fixed assets (continued)

(1) Fixed assets list (continued)

Note: During this reporting period, the impairment loss of fixed assets of Shanxi Tianhao Chemicals Co., Ltd, a

subsidiary of the Group, is due to the impact of micro-economy environment, shortage of raw material supply,

running below capacity, always in the red since putting into production and existing impairment loss sign.

According to the assessment report of Zhongtong Ping Bao Zi No. [2011] 053 prepared by Zhongtongcheng Assets

Appraisal Co., Ltd and the estimation made on the assets team of this subsidiary and differences between the

current value of future cash flow and its net book value, the impairment loss of fixed assets is recognized as RMB

97,558,627.

(2) Financial leased fixed assets

Original Accumulated Net bookItem book value depreciation value

Plant, machinery and equipments 890,908,970 34,032,940 856,876,030

Total 890,908,970 34,032,940 856,876,030

(3) As at the end of the reporting period, net book value of buildings without ownership certificates is totalling

RMB 148.56 million.

(4) Among the increase amount of fixed assets, RMB 3,377.59 million is transferred from construction in

progress. Among the increase amount of depreciation, RMB2,231.62 million is accrued in current period.

(5) There is no provision and depreciation of fixed assets of lands, as overseas subsidiaries enjoy the permanent

ownership of the land.

(6) As at the end of the reporting period, there were no idle fixed assets.

(7) As at the end of the reporting period, the original value of the fully depreciated fixed assets still in use is

RMB 4,417.65million in the Group.




12. Construction in progress

(1) List of construction in progress

At December 31, 2010 At January 1, 2010 Book Depreciation Book Book Depreciation BookItems balance provision value balance provision value

Wei jian construction 532,676,319 – 532,676,319 175,729,108 – 175,729,108Technical revamping construction 71,639,943 – 71,639,943 77,505,345 – 77,505,345Infrastructure construction 308,617,173 – 308,617,173 906,921,652 – 906,921,652Safety construction – – – 700,000 – 700,000Exploration construction 114,638,016 – 114,638,016 19,713,027 – 19,713,027

TOTAL 1,027,571,451 – 1,027,571,451 1,180,569,132 – 1,180,569,132

(2) Changes of significant construction in progress

At Reversals At January 1, Transferred into Foreign December 31,Items 2010 Addition Fixed assets Others exchange 2010

Ordos methanol project - 123,216,759 1,826,705 - – 121,390,054Moolarben open cut project 848,961,509 872,297,873 1,674,784,112 - 44,442,323 90,917,593Wanfu coal mine project 37,726,484 13,041,940 - - – 50,768,424Zhaolou power plant project 9,187,624 22,851,891 - - – 32,039,515

Total 895,875,617 1,031,408,463 1,676,610,817 – 44,442,323 295,115,586

Including: Accumulated amount of Investment/ amount of interests (%) interests Budgeted budgeted interests capitalization capitalization CapitalItems amount amount (%) capitalization in 2010 rate of 2010 sources

Ordos methanol project 511,490,000 24 – – – Self-raisedMoolarben open cut 1,770,460,751 97 41,088,561 36,863,282 8.24 Bank loan project and self-raisedWanfu coal mine project 3,309,000,000 2 – – – Self-raisedZhaolou power plant project 1,767,000,000 2 – – – Self-raised

Total 7,357,950,751 41,088,561 36,863,282 –

13. Materials held for construction of fixed assets

At January 1, At December 31,Items 2010 Addition Decrease 2010

Materials held for construction 9,683,444 91,551,666 86,853,558 14,381,552Equipments held for construction 2,494,390 4,333,798 3,542,075 3,286,113

TOTAL 12,177,834 95,885,464 90,395,633 17,667,665



VIII. NOTES TO CONSOLIDATION FINANCIAL STATEMENTS continued

14. Intangible assets

(1) Intangible assets

At January 1, Decrease Foreign exchange At December 31, Items 2010 Addition and transfer translation difference 2010

Cost price 19,594,054,709 396,700,832 978,117,998 1,668,751,852 20,681,389,395Mining rights 14,697,046,621 206,921,668 539,069,607 1,302,498,520 15,667,397,202Unproved mining equity interest 3,678,595,923 – 245,314,687 339,628,848 3,772,910,084Land use rights 851,002,356 55,860,012 – – 906,862,368Exploration and evaluation expenditures 161,251,642 – 151,975,746 8,461,778 17,737,674Patents and know-how 153,235,000 – – 14,612,500 167,847,500Rail access right 41,523,479 1,316,577 41,409,921 2,135,362 3,565,497Software 4,044,408 8,039,744 348,037 713,444 12,449,559Water access right 7,355,280 124,562,831 – 701,400 132,619,511

Accumulated amortization 258,236,840 368,397,721 77,004,165 12,750,364 562,380,760Mining rights 115,690,168 341,528,953 72,162,338 12,566,256 397,623,039Unproved mining equity interest – – – – –Land use rights 142,542,789 17,957,475 – – 160,500,264Exploration and evaluation expenditures – 1,607,923 – 73,164 1,681,087Patents and know-how – – – – –Rail access right – 5,014,083 4,773,269 10,957 251,771Software 3,883 2,289,287 68,558 99,987 2,324,599Water access right – – – – –

Book value 19,335,817,869 – – – 20,119,008,635Mining rights 14,581,356,453 – – – 15,269,774,163Unproved mining equity interest 3,678,595,923 – – – 3,772,910,084Land use rights 708,459,567 – – – 746,362,104Exploration and evaluation expenditures 161,251,642 – – – 16,056,587Patents and know-how 153,235,000 – – – 167,847,500Rail access right 41,523,479 – – – 3,313,726Software 4,040,525 – – – 10,124,960Water access right 7,355,280 – – – 132,619,511

(2) The original value of intangible asset and the book value were increased by RMB 179.98 million and RMB

179.2 million respectively, which was due to the purchase of 3 companies, such as Inner Mongolia Yize

Mining Investment Co., Ltd.

(3) The original value of intangible asset and the book value were decreased by RMB 708.3 million and

RMB639.48 million respectively, which was due to the entire disposal of the investee company--Minerva JV

and its related subsidiaries of Felix.

(4) All the increased accumulative amortization is normal amortization of intangible assets.




15. Goodwill

At December 31, At January 1, Items 2010 2010

Acquisition of Yanmei Shipping 10,045,361 10,045,361Acquisition of Felix 658,057,122 766,816,209

Total 668,102,483 776,861,570

Note 1: Felix and Yanmei Shipping are the subsidiaries acquired in a business combination not involving enterprises under

common control. The goodwill is the excess of the cost of acquisition over the interest of Felix and Yanmei Shipping in

the fair value of the identifiable net assets at the date of acquisition. During reporting period, the decrease of goodwill is

mainly due to that RMB181.88 million of goodwill was transferred out accordingly when Felix disposed Minerva Joint

Venture and its subsidiaries, moreover, goodwill increased by RMB73.12 million due to exchange rate fluctuation.

Note 2: As at the end of the reporting period, the Group confirmed after the test there is no impairment in cash generating unit

including goodwill.

16. Long-term deferred expenses


Prepayment for resource compensation fees 12,020,879 15,969,251Project operation and maintenance fees 6,071,700 –Parking fees in underground parking lot of Luhua Yuan 74,375 –

Total 18,166,954 15,969,251

Note: In accordance with the relevant regulations, Heshun Tianchi is required to pay resources compensation fees to

the Ministry of Resources at a rate of RMB2.7 per tonne of raw coal mined. Heshun Tianchi has prepaid resources

compensation fees equivalent to extract 10 million ton ROM coals which would be amortized according to the actual

production.

17. Deferred tax assets and deferred tax liabilities

(1) Confirmed deferred tax assets and deferred tax liabilities


1. Deferred tax assets 1,751,958,422 1,611,884,698 Deferred tax assets of the parent company 1,214,315,872 869,395,462 Deferred tax assets of Yancoal Australia 534,480,749 736,887,476 Deferred tax assets of Hua Ju Energy Co., Ltd. 3,161,801 5,601,7602. Deferred tax liabilities 2,580,863,887 1,791,460,318 Deferred tax liabilities of the parent company 28,805,278 50,622,822 Deferred tax liabilities of Yancoal Australia 2,552,058,609 1,740,837,496




17. Deferred tax assets and deferred tax liabilities (continued)

(2) Temporary differences

1) Temporary differences of the parent company


1. Deductible temporary differences items Land subsidence, restoration, rehabilitation and environmental costs 2,238,201,862 1,560,638,332 Accrued unpaid salaries 628,910,704 430,359,537 Hedging instrument liability 155,317,423 – Mining rights 412,918,565 272,210,125 Wei jian Fei 801,427,315 595,739,226 Development fund 611,512,916 611,512,916 Bad debt provision 19,186,352 24,607,536 Termination benefit 2,435,556 4,921,217

Total 4,869,910,693 3,499,988,889

2. Taxable temporary differences items AFS financial assets fair value adjustment 115,221,110 202,491,289

Total 115,221,110 202,491,289

2) Temporary differences of overseas subsidiaries


1. Deductible temporary differences items Unrecovered loss 1,211,592,117 1,878,902,087 Hedging instrument liability – 23,536,896 Withhold unpaid salaries 129,543,000 111,182,290 Amortization of assets 3,239,030 23,674,257 Accrued expenses 173,085,214 158,384,513 Reclamation costs 155,812,610 126,026,204 Unrealized foreign currency loss – 132,933,713 Others 108,330,524 1,651,627

Total 1,781,602,495 2,456,291,587

2. Taxable temporary differences items Unrealized foreign currency profit and loss 2,739,050,404 132,545,537 Assets amortization and recognition 5,443,426,962 5,593,982,280 Hedging instruments assets 224,819,797 37,760,086 Others 99,564,866 38,503,750

Total 8,506,862,029 5,802,791,653




18. Other non-current assets


Prepayment for investment 117,925,900 117,925,900

Total 117,925,900 117,925,900

Note: For prepayment for investment, please refer to Note XI,1,(1).

19. Provision for devaluation of assets statement

At January 1, Provision of Decrease At December 31, Items 2010 the year Reversal Others 2010

Bad debt provision 26,395,568 1,007,542 5,892,460 37,221 21,473,429Fixed assets devaluation provision – 97,558,627 – – 97,558,627

Total 26,395,568 98,566,169 5,892,460 37,221 119,032,056

20. Short-term loans

At December 31, At January 1, Items Currency 2010 2010

Debt of honour RMB 134,278,000 –Guaranteed debt RMB 161,133,600

Total 295,411,600 –




21. Tradable financial liabilities

Fair value Fair value at December 31, at January 1, Items 2010 2010

Hedging instrument — forward foreign currency contracts 12,269,276 23,979,678Hedging instrument — forward interest rate swaps contracts 153,908,651 4,353,143

Total 166,177,927 28,332,821

Note 1: To meet the requirement of the acquisition of Felix, Yancoal Australia borrowed a bank loan of USD3 billion. In July

2010, the Company entered into interest rate swap contracts amounting to USD1.5 billion with Bank of China (BOC),

China Construction Bank (CCB) and China Development Bank (CDB). Pursuant to the contracts, the Company should

pay interest expenses to BOC, CCB and CDB at the annual rate of 2.755%, 2.42% and 2.41% respectively, BOC, CCB

and CDB should quarterly pay interest expenses to the Company at the annual rate of LIBOR plus the margin of 0.75%

on the agreed date quarterly. All the contracts terms are within four years. At the end of 2010, the fair value of the

Contracts was RMB150.65 million. Through the retrospective review, the Company considers that the hedge is effective

and there is no invalid hedge had been recognized in the income statement.

Note 2: Except for the description in Note1, all the other hedging are forward foreign currency contracts to hedge foreign

currency risks signed by overseas subsidiaries of the Company to avoid the risk of foreign currency rate fluctuation and

interest rate swaps contracts to hedge cash flow risks signed by overseas subsidiaries of the Company to avoid the risk of

interest rate fluctuation.

22. Notes payable


Commercial acceptance bill 126,958,580 128,076,028

Total 126,958,580 128,076,028

Note: All the notes payable will be due within 6 months.




23. Accounts payable

(1) Accounts payable


Total 1,516,920,701 1,306,859,922Including: over 1 year 148,450,510 146,958,956

(2) Large amount accounts payable aging over 1 year mainly is last payment payable for equipments and

materials, and there is no large amount of individual accounts payable after the period.

(3) Accounts payable at the end of the current period due to the shareholders is RMB0.34 million.

(4) Foreign currency balance in accounts payable

At December 31, 2010 At January 1, 2010 Foreign Exchange Equivalent Foreign Exchange Equivalent Items currency rate RMB currency rate RMB

USD 713,013 6.6227 4,722,071 – – –AUD 71,243,679 6.7139 478,322,936 68,117,955 6.1294 417,522,193

Total 483,045,007 417,522,193

24. Advances from customers

(1) Advances from customers


Total 1,473,772,452 1,664,427,222Including: over 1 year 40,068,591 39,802,391

(2) Advances aging over 1 year are RMB40.07million, mainly due to the unrealized sales. Because of the decline

of demand by the costumers or disagreement on the price, customers did not pick up coals after advance

payments.

(3) Advances from customers in the end of the current period payable to shareholders of the Group holding

more than 5% (including 5%) shares are excluded for the period.




25. Salaries and wages payable

Foreign currency At January 1, Addition for Payment for translation At December 31, Items 2010 this period the period difference 2010

Salary (including bonus, allowance and subsidies) 397,807,623 4,417,459,962 4,318,178,738 1,139,344 498,228,191Staff welfare – 725,153,726 725,153,726 – –Social insurance 16,301,739 1,197,205,232 1,160,158,953 – 53,348,018including: 1. Medical insurance 4,190,879 336,350,310 302,915,426 – 37,625,763 2. Basic pension insurance 3,954,515 719,420,162 718,071,473 – 5,303,204 3. Unemployment insurance 5,239,165 71,097,032 69,304,516 – 7,031,681 4. Injury insurance 723,741 34,838,412 35,465,855 – 96,298 5. Maternity insurance 2,193,439 35,499,316 34,401,683 – 3,291,072Housing fund 2,717,978 168,091,855 160,911,411 – 9,898,422Union fund and Staff education fund 93,260,131 150,651,437 103,388,010 – 140,523,558Compensation for terminating labour relations 4,921,217 – 2,485,661 – 2,435,556Others 69,147,483 348,412,094 308,648,906 10,310,261 119,220,932

Total 584,156,171 7,006,974,306 6,778,925,405 11,449,605 823,654,677

Note: During the reporting period, salary and wages payables increased by 41%, mainly due to that year-end bonus accrued by

the enterprises in December are unpaid; there is no payment in arrears of the balance at the end of period, all of which

has been released in January 2011.

The amount of compensation for terminating labor relations is RMB2.49million. “Others” are employees benefits

accrued for overseas subsidiaries, such as annual leave, sick leave.

26. Taxes payable


Value added tax 82,953,456 68,251,582Business tax 11,856,854 2,588,763Income tax 1,062,374,981 587,213,087Price reconciliation fund 36,030,697 34,764,398Taxes of goods and services -26,592,549 -55,083,753Others 180,505,757 81,216,968

Total 1,347,129,196 718,951,045

Note: During the reporting period, tax payables increased by 87%, mainly due to the significant increase of the corporate profit

compared with the previous period and the consequent increase in corporate income tax.




27. Other payable

(1) Other payables


Total 2,466,223,721 3,312,206,691Including: aging over 1 year 701,072,332 604,173,517

Note: Other payables for the current period decreased by 26%, mainly due to accounts payables repaid by Felix.

(2) As at December 31, 2010, amounts payable due to the parent company is totalling up to RMB855.01 million.

(3) Other payables with large amount by the end of the period

Item Payable Aging Nature/Content RMB

Yankuang Group Co., Ltd 855,013,956 Within 1 year Material and project funds Mining right 412,918,565 1 to 3 years Compensation fees for mining rightYankuang Group Donghua Construction 123,024,828 1 to 2years Project funds Co., LtdYankuang Donghua Thirty-seven Chu 37,357,058 1to 2 years Project fundsYankuang Keao Aluminium Co., Ltd 20,052,082 Within 1 year Gas supplyGladstone Port Group 11,756,388 Within 1 year Borrowings

Total 1,460,122,877

(4) Foreign currency balance in other payables

At December 31, 2010 At January 1, 2010 Foreign Exchange Equivalent Foreign Exchange Equivalent Items currency rate RMB currency rate RMB

AUD 2,150,856 6.7139 14,440,632 137,552,933 6.1294 843,116,948USD 14,772,500 6.6227 97,833,836 – – –

Total 112,274,468 843,116,948




28. Non-current liabilities due within one year

(1) Non-current liabilities due within one year


Long-term borrowing due within a year 236,844,800 941,410,000Long-term payable due within a year 86,026,208 672,416,265Provisions due within 1 year 3,218,442 3,468,346Deferred gain due within 1 year 3,178,435 2,901,725

Total 329,267,885 1,620,196,336

(2) Long-term borrowing due within a year

At December 31, At January 1, Loan category 2010 2010

Guaranteed loan 22,000,000 22,000,000Mortgaged loan 214,844,800 919,410,000

Total 236,844,800 941,410,000

Note: As at the end of the reporting period, RMB82.67 million of long-term borrowings due within a year and

RMB214.84 million of mortgage loan arises on syndicate financing of Felix. See (3) of this section.

(3) Financing from bank syndicate by Felix

At December 31, 2010Items AUD RMB

Financial lease 12,313,150 82,669,258Long-term loans 32,000,000 214,844,800

Total 44,313,150 297,514,058

Note: Felix entered into the AUD 383.33 million financing agreement with bank syndicate. Pursuant to the agreement,

the syndicate provides financing service including loans and financial lease which shall be cross-guaranteed

by Felix and its subsidiaries. As of 31 December 2010, collateral included AUD625.35 million of fixed assets,

AUD24.26 million of construction in progress and AUD2,718.61 million of intangible assets.

Meanwhile, the agreement stipulates that: the net values of tangible assets of Felix and its subsidiaries must exceed

the amount appointed in the agreement, and the respective shares of coal price hedging contracts and interests

hedging contracts must exceed the appointed proportion. The loans and financial lease should be repaid during

the years of 2010-2014.

As at the end of the 31 December 2009, the Company carried the obligation of paying all of the above mentioned

financings immediately because of the violation of the agreement by Felix. The long-term borrowings and financial

lease under the agreement was reclassified as other non-current liabilities due within one year. As of 31 December

2010, Felix meets the above loan requirement. AUD44.31 million of borrowings due within 1 year are considered

as other non-current liabilities due within 1 year, AUD110.12 million of financial leasing amounts due over 1 year

are considered as long-term payables.




29. Long-term loan

(1) Long-term loan category

At December 31, At January 1, Loan category 2010 2010

Debt of honour 657,962,200 –Guaranteed loan 20,265,008,000 20,911,728,000Mortgaged loan 738,529,000 –

Total 21,661,499,200 20,911,728,000

(2) Five largest long-term borrowings

Starting Expiration Interest Lender date date rate At December 31, 2010 At January 1, 2010 (%) USD RMB USD RMB

Sydney branch of BOC (note 1) 2009-12-16 2014-12-16 Libor+0.75% 2,400,000,000 15,894,480,000 2,400,000,000 16,387,680,000Hong Kong branch of CDB (note 1) 2009-12-16 2014-12-16 Libor+0.75% 300,000,000 1,986,810,000 300,000,000 2,048,460,000Hongkong branch of CCB (note 1) 2009-12-16 2014-12-16 Libor+0.75% 200,000,000 1,324,540,000 200,000,000 1,365,640,000Sydney branch of BOC (note 1) 2009-12-9 2014-12-16 Libor+0.8% 140,000,000 927,178,000 140,000,000 955,948,000Commonwealth Bank of Australia (note 2) 2009-10-27 2014-10-26 BBSY+3.8% AUD 110,000,000 738,529,000 – –

Note 1: Yan Coal Australia Pty Ltd borrowed USD3.04 billion from the bank syndicate of banks taken the lead by Sydney

branch of BOC, which was guaranteed by the Company, at the same time, the Company was counter guaranteed

by Yankuang Group, the parent company of the Company.

Note 2: See Note “VIII, 28”.




30. Long-term payables

(1) The details of long-term payables

Amount at Expiration Amount at 1 Interest rate December 31,Lender (Year) January 2010 (%) Accrued Interest 2010 Loan condition

Total – 12,244,163 – 205,754,188 752,325,971 –Including:Commonwealth Bank of Australia (note 2) 2014 – 8.73 197,730,744 710,504,443 MortgageCaterpillar Finance Corporation (Note 2) 2014 – 8.73 693,839 2,493,166 MortgageKomatsu Australia Finance Limited (Note 2) 2014 – 8.73 7,329,605 26,337,414 MortgageDeferred payment for acquisition 2016 12,244,163 – – 12,990,948 Unsecured and of Minerva interest-free

(2) The details of financial leasing payables among long-term payables

Amount at December 31, 2010 Amount at January 1, 2010 Foreign ForeignItems currency RMB currency RMB

Commonwealth Bank of Australia 105,825,890 710,504,443 – –Caterpillar Finance Corporation 371,344 2,493,166 – –Komatsu Australia Finance Limited 3,922,819 26,337,414 – –

Note 1: There is no independent third party to guarantee the financial leasing of the Group.

Note 2: See Note “VIII, 28”.

31. Provisions

At January 1, Carry At December 31, Items 2010 Additions forward 2010

Reclamation, restoration and environment expenses 122,557,899 30,036,278 – 152,594,177

Total 122,557,899 30,036,278 – 152,594,177

Note: Reclamation, restoration and environment expenses accrued for the restoring of coal mines based on the accounting

policy as stated in Note IV, 19. The obligation of restoring will be exercised when mining areas are out of use or coal

resource dried up.




32. Other non-current liabilities


Deferred income-leaseback 7,946,089 10,156,042Deferred income-government grant 7,980,020 3,980,000

Total 15,926,109 14,136,042

(1) The deferred income of leaseback incorporated by acquisition of Felix generates from the leaseback of

Yarrabee CHPP.

(2) Government grant is the coal production safety appropriation and infrastructure construction subsidies

received at current period.

Balance at December 31, 2010 Amounts Amount Amount included included charged in other in other to current Amount of Government non-current current profit return for Reasongrant category liability liability and loss the year of return

Coal production safety appropriation 3,980,000 – – – –Infrastructure construction subsidies 4,000,020 – – – –

Total 7,980,020 – – – –

33. Share capital

At January 1, 2010 At December 31, 2010Shareholders names/class Amount % Amount %

Listed shares with restricted trading conditionsShares held by state-owned legal person 2,600,000,000 53 2,600,000,000 53Shares held by management 41,800 – 21,800 –Subtotal shares with restricted trading conditions 2,600,041,800 53 2,600,021,800 53

Shares without trading restrictionA shares 359,958,200 7 359,978,200 7H shares 1,958,400,000 40 1,958,400,000 40Subtotal of shares without trading restriction 2,318,358,200 47 2,318,378,200 47

Total share capital 4,918,400,000 100 4,918,400,000 100




33. Share capital (continued)

Note: The share reform plan has been implemented by April 3, 2006. On the first trading day after the completion of the

share reform, the shares owned by Yankuang Group, the sole unlisted share holder of the Company, became tradable.

However, Yankuang Group committed that it will not sell these shares in 48 months after the implementation of the

reform. In respect of the Yankuang Group has promised that the Company will participate in the investment and joint

development in the producing oil from coal project when performing the reform of share equity split, there has not been

significant progress. As at the reporting date, since the Yankuang Group has not finished the above commitments, its

holding shares in the Company will not be traded in the market.

34. Capital reserves

At January 1, At December 31, Items 2010 Addition Decrease 2010

Share premium 2,567,571,003 – 4,532,580 2,563,038,423Other capital reserves 1,980,080,737 1,107,000 41,847,039 1,939,340,698

Total 4,547,651,740 1,107,000 46,379,619 4,502,379,121

Note: Decrease in share premium for the period was caused by the registered capital increase of Heze Neng Hua and

acquisition of minority equity interest of Tianhao Chemical; both of them are subsidiaries of the Company. The decrease

in other capital reserves for the period was caused by the change of fair value of available-for-sale financial assets and

cash flow hedging contract held by the Group. Other capital reserve increase was caused by accounting National Energy

Conservation Awards received in the period by HD Zouxian Co., Ltd, the investee of the Company, in equity method.

35. Special reserves


Wei jian fei 595,739,226 257,320,181 23,030,502 830,028,905Safety fee 256,431,170 305,751,903 130,627,170 431,555,903Specific development fund 611,512,916 – – 611,512,916Environmental improvement security fund – 31,452,820 – 31,452,820Production transferring fund – 15,856,410 – 15,856,410

Total 1,463,683,312 610,381,314 153,657,672 1,920,406,954

36. Surplus reserves


Statutory surplus reserve fund 3,241,001,770 654,857,569 – 3,895,859,339

Total 3,241,001,770 654,857,569 – 3,895,859,339




37. Retained earnings

Proportion of accrue or Items Amount distribution (%)

Closing balance of last period 14,168,033,687Add: adjustment from opening balance of retained earnings –Opening balance 14,168,033,687Add: net profit attributable to shareholders of parent company 9,008,621,227Less: Appropriations to statutory common reserve fund 654,857,569 10%Distribution of dividend of common shares 1,229,600,000Closing balance 21,292,197,345

Note: On 25 June 2010, as approved at the 2009 annual general meeting of the Company, the Company made a cash dividend

payment at RMB2.5 per ten share (tax included), i.e. the sum of RMB1,229.6 million, on the basis of total capital on

December 31, 2009.

38. Minority interest

Proportion of minority At December 31, At January 1, Subsidiary interest (%) 2010 2010

Heze Neng Hua 1.67 44,900,658 41,089,934Hua Ju Energy 4.86 35,990,893 32,210,431Subsidiaries of Felix – – 23,542,370Zhongyan Company 47.62 3,596,999 3,787,093Yanmei Shipping 8.00 1,403,755 1,081,145Shanxi Tianchi 18.69 – –Shanxi Tianhao 0.11 – –

Total 85,892,305 101,710,973

Note: The annual loss shared by the minority shareholders of the subsidiaries of Felix exceeded the shared amount at the

beginning of the year enjoyed by the minority shareholders in the subsidiaries, so the excess loss was borne by the

Company because the Articles of Association or Agreement do not stipulate that minority shareholders have an

obligation to undertake the excess loss.

39. Operation revenue and operation cost

Items 2010 2009

Principal operations revenue 33,944,252,289 20,677,139,154Other operations revenue 900,135,263 823,213,061Total 34,844,387,552 21,500,352,215Principal operations cost 17,868,291,683 11,261,416,462Other operations cost 1,037,671,664 958,800,635

Total 18,905,963,347 12,220,217,097




39. Operation revenue and operation cost (continued)

(1) Principal operations – Classification by sector

2010 2009 Operation Operation Items revenue Operation cost revenue Operation cost

Coal mining 32,590,911,479 16,623,717,871 19,947,748,207 10,468,297,207Electricity power 185,542,185 196,950,154 187,540,670 188,854,957Heating supply 25,226,482 12,489,618 15,637,516 7,364,426Coal chemical 629,290,238 724,470,918 258,867,253 352,942,562Other 513,281,905 310,663,122 267,345,508 243,957,310

Total 33,944,252,289 17,868,291,683 20,677,139,154 11,261,416,462

(2) Principal operations – Classification by product

2010 2009 Operation Operation Items revenue Operation cost revenue Operation cost

Revenue from domestic sales of coal products 23,290,385,547 9,970,331,651 17,800,023,340 8,725,561,871Revenue from export sales of coal products 5,310,567,366 2,697,783,015 1,035,222,371 665,197,710Sales of coal purchased from other companies 3,989,958,566 3,955,603,205 1,112,502,496 1,077,537,626Revenue from railway transportation services 513,281,905 310,663,122 267,345,508 243,957,310Sales of methanol 629,290,238 724,470,918 258,867,253 352,942,562Sales of electricity power 185,542,185 196,950,154 187,540,670 188,854,957Sales of heat 25,226,482 12,489,618 15,637,516 7,364,426

Total 33,944,252,289 17,868,291,683 20,677,139,154 11,261,416,462

(3) Principal operations – Classification by area

2010 2009 Operation Operation Area revenue Operation cost revenue Operation cost

Domestic 28,633,684,923 15,170,508,668 19,641,916,783 10,596,218,752International 5,310,567,366 2,697,783,015 1,035,222,371 665,197,710

Total 33,944,252,289 17,868,291,683 20,677,139,154 11,261,416,462

(4) Total sales amount of the 5 largest customers in 2010 is RMB8,384.87 million, which accounts for 24.7% in

total revenue.




40. Operating taxes and surcharges

Items Proportion 2010 2010

Business tax 3%, 5% 20,911,799 12,312,133City construction tax 7% 225,209,879 184,439,941Education fee 3% 136,846,038 80,284,958Local education fee 1% 1,328,202 25,899,239Resource tax 132,823,558 125,352,702

Total 517,119,476 428,288,973

41. Selling expenses

Items 2010 2009

Freight charge 918,388,424 309,494,616Mining right royalty 448,283,882 61,610,196Coal port dues, loading and transportation cost 195,230,053 100,299,626Benefits, social insurance and welfare of employees 66,910,416 31,059,949Self-owned car cost 13,874,891 15,935,253Business entertainment expenses 5,144,981 6,266,337Others 126,603,708 53,144,578

Total 1,774,436,355 577,810,555

Note: For the reporting period, selling expenses increased by 207% over the previous year, mainly due to that the Company

completed the acquisition of Felix on December 23, 2009, whose income statement is incorporated into the consolidated

financial statements from this reporting year.

42. Administrative expenses

Item 2010 2009

Benefits, social insurance and welfare of employees 1,541,507,240 1,456,224,138Materials and repairs expenses 710,192,479 575,808,126Mineral resources compensation fees 226,577,559 177,841,994Depreciation expense 295,552,496 165,804,406Research and Development Costs 144,627,000 45,847,894Property management fees 140,000,000 141,838,475Taxes 105,715,855 71,993,672Commission, consulting and service charges 117,510,823 134,874,265Business travel, office, conference and hospitality fees 89,842,115 72,501,549Amortization, leasing fees, etc 74,015,671 59,296,538Others 352,847,491 254,122,785

Total 3,798,388,729 3,156,153,842




43. Financial expenses

Items 2010 2009

Interest expenses 410,196,884 31,492,670Less: interest income 188,415,835 187,603,581Add: exchange gain or loss -2,665,420,659 -46,150,169Add: other expenses 226,339,590 40,062,187

Total -2,217,300,020 -162,198,893

Note: During the reporting period, financial expenses decreased by 1267% over the previous year, mainly due to the unrealized

foreign exchange gains of USD claims and liabilities accounted in AUD arising from significant exchange rates

fluctuation.

44. Impairment loss

Items 2010 2009

Bad debt provision -4,884,918 -13,634,286Fixed assets impairment provision 97,558,627 –

Total 92,673,709 -13,634,286

Note: Concerning the increase of fixed assets impairment provision, please see Note”VIII, 11”.

45. Investment income

(1) Sources of investment income

Items 2010 2009

Long-term equity investment income under equity method 8,407,750 109,786,300Income from disposal of long-term investment 118,087,932 –Investment from AFS financial assets 4,504,096 2,287,590

Total 130,999,778 112,073,890

Note: For the reporting period, income from disposal of long-term investment included RMB117.93 million from

disposal of Minerva and its subsidiaries (See Note “VII, 2, (2)” and RMB160,000 from disposal of Zhejiang

Jiangshan Concrete Co., Ltd.




45. Investment income (continued)

(2) Long-term equity investment income under equity method

Items 2010 2009 Reasons for change

Total 8,407,750 109,786,300Including:China HD Zouxian Co., Ltd. 6,767,550 109,786,300 Decrease in current profit of HD ZouxianYankuang Group Finance Co., Ltd 2,102,408 – New increase for the periodAshton Coal Mines Limited -462,131 – New increase for the periodAustralian Coal Processing -77 – New increase for the period Holding Pty Ltd

46. Non-operating income

(1) Non-operating income

Items 2010 2009

Gain on disposal of non-current assets 7,029,492 8,756,783Including: gain on disposal of fixed assets 7,029,492 8,756,783Government grant income 43,272,983 29,839,242Long-term unable-to-pay payment 6,667,242 –Other 18,253,674 5,800,521

Total 75,223,391 44,396,546

(2) Government grant income

Items 2010 2009 Basis and sources

Taxation reduced on product from 20,460,814 27,939,242 Jiguoshui Liupizi (2010) NO.1 comprehensive use of resourcesSpecial fund for environment and – 1,900,000 Zoucaijian(2009) NO.5 energy conservation allocated by financial BureauNotice of Releasing Budget Guideline 14,000,000 Jicaijianzhi[2010] No.25 of National Subsidies for Mining Resources Protection ProjectNotice of Releasing Budget Guideline 5,000,000 Jicaijianzhi[2010] No.125 of Subsidizing the Economization and Integrated Utilization of Mining Resources for the Year of 2010Ultra-clean Coal Government Grants 2,512,169 –Notice of Allocation of International 300,000 – Zoucaiqizi[2010] No.49 Market Development Fund to SMEs & Municipal Subsidies on Investment Invitation For The Year 2009Others 1,000,000 – Shandong Province Finance Bureau

Total 43,272,983 29,839,242




47. Non-operating expenses

Items 2010 2009

Loss on disposal of non-current assets 25,458,938 20,598,090Including: loss on disposal of fixed assets 25,458,938 20,598,090Written-off the prepayment of dealings for railway investment and construction – 13,735,202Penalty, supplementary payment and overdue payment 18,099,933 –Donation expenditure 12,815,925 –Other 9,120,475 4,676,423

Total 65,495,271 39,009,715

48. Income taxes

(1) Income taxes

Items 2010 2009

Current tax expense 2,477,825,589 1,813,897,307Deferred tax expense 622,934,749 -309,251,886

Total 3,100,760,338 1,504,645,421

(2) Current tax expense (the Company and the domestic subsidiaries)

Items Amount

Total profit of the year 8,861,407,617Add: increase of tax adjustment 2,016,380,113Less: decrease of tax adjustment 563,073,528Add: unrecognized tax loss –Taxable income of the year 10,314,714,202Statutory income tax rate 25%Income tax payable of the year 2,578,678,551Add: other adjustments 10,085,974Current tax expense 2,588,764,525




48. Income taxes (continued)

(3) Current tax expense (Overseas subsidiaries)

Items Amount

Total profit of the year 3,478,933,672Add: increase of tax adjustment 3,129,270,585Less: decrease of tax adjustment 6,978,000,710Less: recovering of past losses –Taxable income of the year -369,796,453Statutory income tax rate 30%Income tax payable of the year -110,938,936Current tax expense -110,938,936

(4) Income taxes increased by 106%, mainly due to the increase of profit compared with last year.

49. Computation process of basic and diluted earnings per share

Items No. 2010 2009

Net profit attributable to shareholders of the parent company 1 9,008,621,227 3,880,329,329Extraordinary gain attributable to parent company 2 10,167,144 2,151,435Net profit attributable to shareholders of the parent company, excluding extraordinary gain 3=1-2 8,998,454,083 3,878,177,894Total shares at the beginning of the period 4 4,918,400,000 4,918,400,000Shares added through reserves fund addition and shares dividend distribution addition (I) 5 – –Shares added by issuing and debt-to-equity (II) 6 – –Shares added (II) months from next month to the end of the period 7 – –Shares decreased by buy-back and shares shrink 8 – –Number of months from the next month to the end of the period 9 – –Duration of the period in terms of month 10 12.00 12.00Weighted average of common shares issued 11=4+5+6×7÷10-8×9÷10 4,918,400,000 4,918,400,000Basic earnings per share (I) 12=1÷11 1.8316 0.7889Basic earnings per share (II) 13=3÷11 1.8295 0.7885Common shares interest with diluted potential which is recognized as expenses 14 – –Converting fee 15 – –Income tax rate 16 25% 25%Shares added through stock warrant and option exertion 17 – –Diluted earning per share (I) 18=[1+(14-15)×(1-16)]÷(11+17) 1.8316 0.7889Diluted earning per share (II) 19=[3+(14-15)×(1-16)]÷(11+17) 1.8295 0.7885




50. Other comprehensive income

Items 2010 2009

1. Gains (losses) generated by available for sales financial assets -87,270,180 125,224,821 Less: income tax influence generated by available for sales financial assets -21,817,545 31,306,205 Net amount presented in other comprehensive income in past periods and transferred in profits and losses at current period – –

Subtotal -65,452,635 93,918,616

2. Gains (losses) generated by cash flow hedging instruments 54,647,887 9,831,506 Less: income tax influence generated by cash flow hedging instruments 24,160,237 2,949,452 Net amount presented in other comprehensive income in past periods and transferred in profits and losses at current period -6,882,054 11,735,778

Subtotal 23,605,596 18,617,832

3. Difference from foreign currency translation of overseas operation statements 173,461,575 134,183,513 Less: amount transferred into profit and loss of the current period from disposal of overseas operating – –

Subtotal 173,461,575 134,183,513

Total 131,614,536 246,719,961

Note: Other comprehensive income decreased by 47%, mainly due to the substantial decrease of fair value of AFS financial

assets.

51. Cash flow

(1) Other cash received/paid relating to operating activities/investment/finance activities

1) OTHER CASH RECEIVED RELATING TO OPERATING ACTIVITIES

Items 2010

Interest income 188,415,835Sundry revenue 121,226,256Received cash from funds paid on other’s behalf 74,863,566Government grants 22,812,169

Total 407,317,826




51. Cash flow (continued)

(1) Other cash received/paid relating to operating activities/investment/finance activities (continued)

2) OTHER CASH PAID RELATING TO OPERATING ACTIVITIES

Items 2010

Payments for selling and administrative expenses 3,525,430,818Sundry cash payment 76,817,742Donation expenditure 12,815,925Penalty and Overdue Payment 9,993,459

Total 3,625,057,944

3) OTHER CASH RECEIVED RELATING TO INVESTING ACTIVITIES

Items 2010

Decrease of restricted deposits 1,183,398,968Recovery of security 300,904,959Others 4,000,020

Total 1,488,303,947

4) OTHER CASH PAID RELATING TO INVESTING ACTIVITIES

Items 2010

Increase of restricted deposits 1,090,184,158Payment of security 696,161,179Others 1,605,425

Total 1,787,950,762

5) OTHER CASH RECEIVED RELATING TO FINANCING ACTIVITIES

Items 2010

Borrowings of Winpia Company 38,305,768

Total 38,305,768





(1) Other cash received/paid relating to operating activities/investment/finance activities (continued)

6) OTHER CASH PAID RELATING TO FINANCING ACTIVITIES

Items 2010

Repayment of the unsecured loan borrowed for dividend payment by Felix before the acquisition by the Group 584,477,769Payment for financial lease 161,087,902

Total 745,565,671

(2) SUPPLEMENTAL INFORMATION OF CONSOLIDATED CASH FLOW STATEMENT

Items 2010 2009

1. Reconciliation of net profit to net cash flow from operating activities Net profit 9,013,073,516 3,906,530,227 Add: Provision of impairment of assets 92,673,709 -13,634,286 Depreciation of fixed assets 2,231,619,007 1,635,892,892 Amortization of intangible assets 368,397,721 54,079,276 Amortization of long-term deferred expenses 3,950,415 2,761,020 Accrued special reserves 610,833,880 467,032,327 Losses on disposal of fixed assets, intangible and other long-term assets (“-” represents gain) 18,429,446 11,841,307 Financial expenses (“-” represents gain) 316,207,500 -10,993,124 Loss arising from investments (“-” represents gain) -130,999,778 -112,073,890 Influence of deferred taxes assets (“-“ represents increase) 622,934,749 -309,251,886 Decrease in inventories (“-“ represents increase) -759,754,183 -19,575,274 Decrease in receivables under operating activities (“-“ represents increase) -9,379,472,103 -1,223,405,717 Increase in payables under operating activities (“-“ represents decrease) 3,279,689,381 1,782,563,389 Net cash flow from operating activities 6,287,583,260 6,171,766,2612. Changes in cash and cash equivalents Cash, closing 6,771,312,424 8,522,398,899 Less: Cash, opening 8,522,398,899 8,444,144,4571. reconciliation of net profit to net cash flow from operating activities Net addition in cash and cash equivalents -1,751,086,475 78,254,442





(3) Acquiring or disposing subsidiaries and other operating entities

Items 2010

Acquiring subsidiaries and other operating entities1. Price of acquiring subsidiaries and other operating entities 190,095,0002. Cash or cash equivalent paid for acquiring subsidiaries and other operating entities 190,095,000 Less: Cash or cash equivalent owned by subsidiaries and other operating entities –3. Net cash amount paid for acquiring subsidiaries and other operating entities 190,095,0004. Net assets from acquisition of subsidiaries 190,095,000 Current assets 15,608,255 Non-current assets 192,152,745 Current liabilities 17,666,000 Non-current liabilities –Disposing subsidiaries and other operating entities1. Proceeds of disposing subsidiaries and other operating entities 1,288,096,1772. Cash or cash equivalent received for disposing subsidiaries and other operating entities 1,288,096,177 Less: Cash or cash equivalent held by subsidiaries and other operating entities 88,047,4423. Net cash amount received for disposing subsidiaries and other operating entities 1,200,048,7354. Net assets from disposal of subsidiaries 982,919,545 Current assets 249,862,487 Non-current assets 1,028,589,770 Current liabilities 243,556,411 Non-current liabilities 51,976,301

(4) Cash and cash equivalents

Items 2010 2009

Cash 6,771,312,424 8,522,398,899Including: Cash on hand 687,962 486,395 Deposits that can be readily drawn on demand 4,832,791,224 7,980,436,152 Other currency that can be readily drawn on demand 1,937,833,238 541,476,352 Cash equivalents – –Cash and cash equivalents balance 6,771,312,424 8,522,398,899 Including: Cash and cash equivalents with restricted use right by parent company or subsidiaries of the Group – –



IX. RELATIONSHIP OF RELATED PARTIES AND THEIR TRANSACTIONS

i. RELATIONSHIP OF RELATED PARTIES

1. Parent company and ultimate control party

(1) Parent company and ultimate control party

Parent company and Type of Registration Business Statutory Organizationultimate control party ownership address nature representative code

Yankuang Group State-owned Zoucheng, Industry WangXin 166122374 Shandong processing

(2) The registered capital of the Parent Company and its changes.

At January 1, At December 31,Parent Company 2010 Addition Reversals 2010

Yankuang Group 3,353,388,000 – – 3,353,388,000

(3) The proportion and changes of equity interest of the parent company

Shareholding amount Shares proportion At December 31, At January 1, At December 31, At January 1,Parent Company 2010 2010 2010 2010

Yankuang Group 2,600,000,000 2,600,000,000 52.86% 52.86%



IX. RELATIONSHIP OF RELATED PARTIES AND THEIR TRANSACTIONS (continued)

i. RELATIONSHIP OF RELATED PARTIES (continued)

2. Subsidiaries

(1) Subsidiaries

Type of Registration Business Statutory OrganizationSubsidiaries enterprise address nature representative code

Qingdao Free Trade Zone limited liability Shandong Trade and storage Fan Qingqi 16362500-5 Zhongyan Trade Co., LtdYanzhou Coal Mining Yulin limited liability Shaanxi Production and sales of Wang Xin 75881603-8 Neng Hua Co., Ltd methanol and acetic acidYancoal Australia Pty Limited limited liability Australia Investment and shareholding Austar Coal Mine Pty Limited. limited liability Australia Coal mining and salesFelix Resources Limited. limited liability Australia Coal mining and salesYanmei Heze Neng Hua Co., Ltd limited liability Shandong Coal mining and sales Wang Xin 75445658-1Yankuang Shanxi Neng limited liability Shanxi Thermoelectricity investment, Qu Tianzhi 74601732-7 Hua Co., Ltd coal technology serviceShanxi Heshun Tianchi Energy limited liability Shanxi Intensive process of Ren Yi 11285097-4 Co., Ltd coal productShanxi Tianhao Chemicals limited liability Shanxi Production and sales Yin Mingde 73403278-1 Co., Ltd of methanol and coalsShandong Yanmei Shipping limited liability Shandong Freight transportation Wang Xinkun 16612592X Co., Ltd. and coal salesShandong Hua Ju Energy limited liability Shandong Sales and production of Hao Jingwu 73927723-5 Co., Ltd. electricity power with coal slimes and gangue, and comprehensive use of waste heatYanzhou Coal Mining Ordos limited liability Inner Mongolia 600,000 tons methanol Wang Xin 69594585-1 Neng Hua Co., Ltd.Inner Mongolia Yize Mining limited Inner Mongolia Investment Wang Xin 76786334-6 Investment Co., LtdInner Mongolia Rongxin limited Inner Mongolia Methanol production Wang Xin 67067850-7 Chemicals Co., LtdInner Mongolia Daxin limited Inner Mongolia Industrial gas production Wang Xin 67691995-7 Industrial Gas Co., Ltd

(2) The registered capital of subsidiaries and its changes

At January 1, At December 31,Subsidiaries 2010 Addition Decrease 2010

Qingdao Free Trade Zone Zhongyan Trade Co., Ltd 2,100,000 – – 2,100,000Yanzhou Coal Mining Yulin Neng Hua Co., Ltd 1,400,000,000 – 1,400,000,000Yancoal Australia Pty Limited AUD64,000,000 – – AUD64,000,000Austar Coal Mine Pty Limited. AUD64,000,000 – – AUD64,000,000Felix Resources Limited. AUD 445,370,000 AUD 445,370,000Yanmei Heze Neng Hua Co., Ltd 1,500,000,000 1,500,000,000 – 3,000,000,000Yankuang Shanxi Neng Hua Co., Ltd 600,000,000 – – 600,000,000Shanxi Heshun Tianchi Energy Co., Ltd 90,000,000 – – 90,000,000Shanxi Tianhao Chemicals Co., Ltd 150,000,000 – – 150,000,000Shandong Yanmei Shipping Co., Ltd. 5,500,000 – – 5,500,000Shandong Hua Ju Energy Co., Ltd. 288,590,000 – – 288,590,000Yanzhou Coal Mining Ordos Neng Hua Co., Ltd. 500,000,000 – – 500,000,000Inner Mongolia Yize Mining Investment Co., Ltd – 136,260,000 – 136,260,000Inner Mongolia Rongxin Chemicals Co., Ltd – 3,000,000 – 3,000,000Inner Mongolia Daxin Industrial Gas Co., Ltd – 4,110,000 – 4,110,000





2. Subsidiaries (continued)

(3) The proportion and changes of equity interest of subsidiaries

Shareholding amount Shareholding proportion (%) At December 31, At January 1, At December 31, At January 1,Subsidiaries 2010 2010 2010 2010

Qingdao Free Trade Zone Zhongyan Trade Co., Ltd 1,100,000 1,100,000 52.38 52.38Yanzhou Coal Mining Yulin Neng Hua Co., Ltd 1,400,000,000 1,400,000,000 100.00 100.00Yancoal Australia Pty Limited AUD64,000,000 AUD64,000,000 100.00 100.00Austar Coal Mine Pty Limited. AUD64,000,000 AUD64,000,000 100.00 100.00Felix Resources Limited. AUD 445,370,000 AUD 445,370,000 100.00 100.00Yanmei Heze Neng Hua Co., Ltd 2,950,000,000 1,450,000,000 98.33 96.67Yankuang Shanxi Neng Hua Co., Ltd 600,000,000 600,000,000 100.00 100.00Shanxi Heshun Tianchi Energy Co., Ltd 73,180,000 73,180,000 81.31 81.31Shanxi Tianhao Chemicals Co., Ltd 149,790,000 149,770,000 99.89 99.85Shandong Yanmei Shipping Co., Ltd. 5,060,000 5,060,000 92.00 92.00Shandong Hua Ju Energy Co., Ltd. 274,590,000 274,590,000 95.14 95.14Yanzhou Coal Mining Ordos Neng Hua Co., Ltd. 500,000,000 500,000,000 100.00 100.00Inner Mongolia Yize Mining Investment Co., Ltd 179,690,000 – 100.00 –Inner Mongolia Rongxin Chemicals Co., Ltd 4,400,000 – 100.00 –Inner Mongolia Daxin Industrial Gas Co., Ltd 6,000,000 – 100.00 –

3. Joint venture and associated company

(1) Joint venture and associated company

Type of Registration Business Legal Registered Shareholding Investee name enterprise address nature representative capital proportion (%) Registered No.

Associated company

China HD Zouxian Co., Ltd. limited liability Shandong Electricity power Zhong Tonglin RMB3 billion 30 66930776-8Yankuang Group Finance limited liability Shandong Finance Chen Changchun RMB500million 25 56250962-6 Co., Ltd

Joint venture company

Australian Coal Processing limited liability Australia Holding company, 60 Holding Pty Ltd no operationsAshton Coal Mines Limited limited liability Australia Holing and sales AUD100 60 of real-estate

Note: The company holds 60% shares and 33.33% voting shares of Australian Coal Processing Holding Pty Ltd

and Ashton Coal Mines Limited, retailed in NoteVII.i.12.(2).

(2) Financial information stated in Note VIII.10.(3).





4. Other related parties (limited to transaction with the Group)

Type of related relationship Related parties Transactions

(1) Other enterprises under control of the same controlling shareholder and ultimate controlling party

Yankuang Group Tangcun Shiye Co., Ltd. Sales of goods and materials, purchase of materials, acceptance of labours service Yankuang Group Dalu Machinery Co., Ltd. Sales of goods and materials, purchase of materials, acceptance of labours service Yankuang Group Zoucheng Jinming Gongmao Co., Ltd. Sales of goods and materials, purchase of materials Shandong Yankuang International Coking Co., Ltd. Sales of goods and materials Yankuang Group Logistics Co., Ltd. Sales of goods, acceptance of labors Yankuang Group Donghua Construction Co., Ltd. Sales of goods, purchase of materials, acceptance of labors service Yankuang Group Zoucheng Jintong rubber Co., Ltd. Sales of goods and purchase of materials Yankuang Meihua Gongxiao Co.,Ltd Sales of goods Shandong Yankuang Jisan Electricity Co., Ltd. Sales of goods Yankuang Group Coal Chemical Co., Ltd. Sales of goods Yanri Coal Slurry Co.,Ltd Sales of goods Yankuang Group Xinshiji Co., Ltd. Sales and purchase of materials, acceptance of labors service Yankuang Group Electrical and Sales and purchase of materials, acceptance Machinery Equipment Co., Ltd. of labors service Yankuang Guotai Chemicals Co., Ltd. Sales of materials Yankuang Group Hailu Construction Co., Ltd. Sales of materials Yankuang Donghua 37 Chu Acceptance of labors service Yankuang Donghua Geological Co., Ltd. Acceptance of labors service Yankuang Donghua Jian’an Co., Ltd. Acceptance of labors service purchase of materials Yankuang Group Electrical and Machinery Purchase of materials, Acceptance Equipment Co., Ltd. of labors service Yankuang Group Zoucheng Huajian Design Purchase of materials, Acceptance and Research Co., Ltd. of labors service Yankuang Boyang Foreign Economic Purchase of materials, Acceptance and Trading Co., Ltd. of labors service Yankuang Group Changlong Cable Co., Ltd. Purchase of materials Yankuang Group Fuxing Shiye Co., Ltd. Purchase of materials, Acceptance of labors service Yankuang Group Labour Service Co., Ltd. Purchase of materials, Acceptance of labors service Yankuang Group Zoucheng Dehailan Rubber Co., Ltd. Purchase of materials Yankuang Xinshiji Kenuode Dianqishebei Co., Ltd. Purchase of materials, Acceptance of labors service Yanzhou Dongfang Jidian Co., Ltd. Purchase of materials, Acceptance of labors service Yankuang Group Beisu Coal Mine Sales of materials, purchase of goods Yankuang Group Finance Co., Ltd Deposit Other enterprises under control of the Sales and purchase of materials, same controlling shareholder acceptance of labors service(2) Joint ventures Ashton Mining Co., Ltd. Dealings payment, Sales of goods

(3) Other enterprises under control of the overseas subsidiaries’ directors

Coalroc Contractors Co., Ltd. Dealings payment Ilwella Co., Ltd Dealings payment




ii. RELATED PARTY TRANSACTIONS

1. Goods purchasing

Type and name 2010 2009of related parties Amount Proportion Amount Proportion

Parent company and ultimate control party 421,606,402 13% 598,498,407 16%

Total 421,606,402 13% 598,498,407 16%

Note: Based on market price or negotiated price.

2. Goods sales

Type and Name 2010 2009of related parties Amount Proportion Amount Proportion

Yankuang Group and its affiliates (Coal sales) 2,672,424,299 8% 2,086,542,299 10%Joint Ventures (Coal sales) 1,202,255,333 4% – –Yankuang Group and its affiliates(Material sales) 454,253,847 50% 317,478,815 50% Yankuang Group and its affiliates(Electricity power and heat supply) 235,001,700 68% 204,061,936 74%

Total 4,563,935,179 2,608,083,050

Note: Based on market price or negotiated price.

3. Guarantee

Amount Guarantee GuaranteeAssurance Provider Secured party guaranteed starting date maturity date Completion

Yankuang Group Shanxi Neng Hua 154,000,000 2006-02-13 2018-02-19 NoThe Company(note) Yancoal Australia USD 2,900,000,000 2009-12-16 2014-12-16 NoThe Company(note) Yancoal Australia USD 140,000,000 2009-12-09 2014-12-16 NoYancoal Australia Austar AUD 5,590,000 2010-08-25 2011-08-24 NoFelix 7 Subsidiaries of Felix AUD 48,230,000 2008-07-24 NoFelix 4 Entities under joint control AUD 5,860,000 2003-10-16 No

Note: The Company’s holding shareholder Yankuang Group provides counter-guarantee for this guaranteeing events.




ii. RELATED PARTY TRANSACTIONS (continued)

4. Transaction with key management

Total amount of salaries paid to key management (including salaries, welfare and subsidies paid in the form

of cash, goods and others), for the period ended December 31, 2010 is RMB5.78 million. RMB4.28 million

was paid as compared with same period in 2009.

5. Free use of trademark

The trademark of the Company registered and owned by controlling shareholder, can be freely used by the

Company.

6. Investment to Finance Company

Pursuant to the resolutions passed at the thirteen meeting of the third session of the Board of the Company,

the “Capital Contribution Agreement in relation to the formation of Yankuang Group Finance Company

Limited” was signed by the Company with Yankuang Group and China Credit Trust Co. Ltd on 20 April,

2010, of which Yankuang, the Company and China Credit Trust contributed RMB 350 million, RMB125

million and RMB 25 million in cash respectively, representing an equity interest of 70%, 25% and 5%

respectively. In May 2010, all the contribution was in place and the capital verification report of Changheng

Xin Yannei Bao Zi [2010] No.0032 was prepared by Shandong Changheng Xin Certified Public Accountant

Co. The approval has been got by the China Banking Regulatory Commission of Yin Jianfu [2010] N0. 400

on 25 August 2010 and the formal operation has been started since November 2010. As at the end of this

reporting period, the balance of deposits of the Company in Finance Company was RMB1.4 billion and the

interest income during this reporting period was RMB680, 000.




ii. RELATED PARTY TRANSACTIONS (continued)

7. Other transactions

Pursuant to an agreement signed between the Company and Yankuang Group, Yankuang Group manages

staff social insurance. Amount charged to expenses of the Company for the period ended December 31, 2010

and 2009 are RMB1,045.30 million and RMB838.78million respectively.

Yankuang Group manages the retired personnel, retirement benefits expenses are determined by the

Company within the contracted limit. Amount charged to expenses of the Company in 2010 and 2009 are

RMB446.44 million and RMB387.7million respectively.

Pursuant to an agreement signed by the Company and Yankuang Group, the department and subsidiaries

of Yankuang Group provided the following services and charged related service fees during the year,

transaction price shall be determined by market price, government pricing or negotiated price.

2010 2009Items (RMB million) (RMB million)

Laboring received from the GroupConstruction service 655.31 242.59 Road transportation fee 64.94 79.56 Gas and heating expenses 31.78 40.80 Buildings management fee 140.00 140.00 Technicians training fee 26.00 26.00 Repairs service 262.48 388.92 Employees’ benefits 88.60 113.26 Environmental protection and greening 41.70 41.70 Public facilities expenses 34.01 39.07 Others 46.10 46.10

Subtotal 1,390.92 1,158.00




iii. Dealing amount due to or from related party

1. Notes receivables

At December 31, At January 1,Related parties 2010 2010

Parent company 300,000 –Other enterprises under the control of the same parent company 879,032,580 701,041,389

Total 879,332,580 701,041,389

2. Accounts receivables


Other enterprises under the control of the same parent company 79,721 2,487,344Joint venture 53,450,049 81,329,022

Total 53,529,770 83,816,366



Parent company 16,894,070 10,900,000Other enterprises under the control of the same parent company 28,316,469 17,786,748Joint venture 115,479,966 66,321,107

Total 160,690,505 95,007,855

4. Notes payables


Other enterprises under the control of the same parent company 500,000 9,116,448

Total 500,000 9,116,448




iii. Dealing amount due to or from related party (continued)

5. Accounts payables


Parent company 338,284 338,448Other enterprises under the control of the same parent company 88,596,988 64,171,861Joint venture 7,942,994 –

Total 96,878,266 64,510,309

6. Other payables


Parent company 855,013,956 844,251,236Other enterprises under the control of the same parent company 323,880,880 389,556,278Other enterprises under the control of overseas subsidiaries – 216,292,937

Total 1,178,894,836 1,450,100,451

7. Advance from customers


Other enterprises under the control of the same parent company 95,075,975 175,678,911

Total 95,075,975 175,678,911

8. Long-term payables due within one year

At December 31, At January 1,Related parties (Items) 2010 2010

Parent company – 12,648,464

Total – 12,648,464



X. CONTINGENCY

1. Guarantees

By December 31, 2010, the Company and Felix guaranteed for other subsidiaries of the Group as stated in Note

IX.2. (3).

2. As at December 31, 2010, the Group does not have any other significant contingencies.

XI. COMMITMENTS

1. Ongoing investment agreement and related financial expenditure

(1) The Company entered into an agreement with two independent third parties to establish a company to

operate Yulin Yushuwan Coal Mine in Shaanxi. Pursuant to agreement, the Company shall pay RMB196.80

million and the Company has paid RMB117.93 million. By December 31, 2010, RMB78.87 million is still not

paid by the Company. As at this reporting date, the Company’s application legal files for establishment and

registration have been submitted to National Development and Reform Committee (Shaan Development

and Reform Coal and Electricity (2009) No. 1652) and related government departments, and are still waiting

to be approved.

(2) During this reporting period, the Company, independent third party and its controlling entity entered

into the Asset Transfer Agreement for the acquisition of all the assets and equities of Anyuan coal mine

owned by the independent third party in Nalintaohe Town of Inner Mongolia Ejin Horo Banner City,

for a consideration of RMB1.435 billion. These assets and equities include: mining right of the coal mine;

intangible assets such as land use right; real estate ownership; machinery equipment and other fixed assets

related to businesses with Anyuan coal mine and related rights. As at the date of this report, the Company

has paid asset transfer payment of RMB1.08 billion and the unpaid transfer payment amounting to RMB355

million. As at the date of this report, the registration of business license, mining license, coal production

license, safety production license, coal business license and state-owned land use right license of Anyuan

coal mine are still under modification.

(3) During this reporting period, the Company and independent third party entered into the Equity Transfer

Agreement for the disposal of 51% equity interest of Inner Mongolia Haosheng Coal Mining Company

Limited, with the agreed transfer consideration of RMB6.70018 billion. As at the end of this reporting

period, the Company has paid equity transfer payment of RMB2.04575 billion and the unpaid payment

amounting to RMB4.65443 billion.



XI. COMMITMENTS (continued)

2. Ongoing lease agreements and related financial influence

As at December 31, 2010 (T), the amount shall be carried by the Group for irrevocable operating lease and

financial lease of machinery and equipments, buildings, use right of railway stated as the follows.

Terms Operating lease Finance lease

T+1 years 6,043,275 152,739,976T+2 years 3,189,546 150,124,838T+3 years 1,732,234 148,481,255T+3 years later – 599,418,952

Total 10,965,055 1,050,765,021

3. By December 31, 2010, the Group’s other commitments which have not been recognized in the financial

statements are as follows:

December 31, December 31,Commitments 2010 2010

Capital expenditure-purchase and construction of assets 1,021,910,000 716,200,000

Total 1,021,910,000 716,200,000

4. Except for the above stated commitments, the Company has no other significant commitments to claim by

December 31, 2010.



XII. EVENTS AFTER BALANCE SHEET DATE

1. Pursuant to the resolutions passed at the eighteenth meeting of the fourth session of the Board of the Company

held on 17 January 2011, Yanzhou Coal increased the registered capital of Ordos Neng Hua by RMB2.6 billion

with its own capital and the registered capital of Ordos Neng Hua increased from RMB0.5 billion to RMB3.1

billion. As at the disclosure date of this report, the capital increment procedures of Ordos Neng Hua are still in the

process.

2. As approved at the seventeenth meeting of the fourth session of the Board, the Company with its controlling

shareholder Yankuang Group and Shaanxi Yanchang Petroleum (Group) Corp. Ltd entered into the Capital

Contribution Agreement for the Formation of Shaanxi Future Energy Chemical Corp. Ltd and made related

arrangement on formation of Shaanxi Future Energy Chemical Corp. by way of joint investment, of which,

Yankuang Group, the Company and Shaanxi Yanchang Petroleum (Group) Corp. Ltd contributed RMB2.7 billion,

RMB1.35 billion and RMB1.35 billion in cash respectively, representing an equity interest of 50%, 25% and 25%

respectively.

3. As approved at the nineteenth meeting of the fourth session of the Board held on 28 January 2011, for a

consideration of RMB 7.8 billion of its own fund, Ordos Neng Hua successfully obtained the mining rights of

Zhuan Longwan coal mine zone of Dongsheng Coal Field in Inner Mongolia Autonomous Region and entered

into the Sales Confirmation with Department of Land and Resources of the Inner Mongolia Autonomous Region.

4. Pursuant to the resolutions passed at the seventeenth meeting of the fourth session of the Board of the Company,

White Ming Limited, a subsidiary of Yancoal Australia Pty Ltd, and independent third party entered into the

Purchase Agreement on 1 February 2011 for the acquisition of 30% equity interests of Aston Coal Mines Limited

held by independent third party, for a consideration of USD250 million. Upon this completion of acquisition, the

equity interest of White Ming Limited will increase from 60% to 90%. As at the disclosure date of this report, the

acquisition is still undertaking.

5. On 25 march, 2011, as approved at the twentieth meeting of the Fourth Board, the Company proposed to declare a

cash dividend payable at RMB 5.9 per ten share (tax included), i.e. the sum of RMB 2.90186 billion, on the basis of

total capital on December 31, 2010. This shall be implemented after the authorization by meeting of shareholders.

6. Except for the above stated events, the Group has no other significant events after balance sheet day to claim.



XIII. SEGMENT REPORT

1. Segment report in 2010

Railway Electricity

Coal mining transportation power and Undistributed Inter-segment

Items business business methanol items elimination Total

Operating revenue 34,113,804,407 549,333,079 1,647,639,152 44,982,182 1,511,371,268 34,844,387,552 – External 33,338,618,955 513,281,905 983,096,864 9,389,828 – 34,844,387,552 – Inter-segment 775,185,452 36,051,174 664,542,288 35,592,354 1,511,371,268 –

Operating cost and expenses 21,461,237,075 478,644,797 1,921,277,670 36,632,809 1,157,510,533 22,740,281,818 – External 17,604,686,646 310,663,122 982,904,563 7,709,016 – 18,905,963,347 – Inter-segment 582,361,069 21,937,927 531,633,830 21,577,707 1,157,510,533 – – Operating expense during the period 3,274,189,360 146,043,748 406,739,277 7,346,086 – 3,834,318,471

Total operating profit(loss) 12,652,567,332 70,688,282 –273,638,518 8,349,373 353,860,735 12,104,105,734

Total assets 79,631,271,296 637,184,256 4,436,934,126 44,048,711 11,920,897,860 72,828,540,529Total liabilities 38,304,514,958 38,782,257 3,037,706,360 18,948,225 5,379,022,824 36,020,928,976Complementary informationDepreciation and amortization 2,023,167,637 82,879,720 495,029,758 2,890,028 – 2,603,967,143Non-cash expenses excluding depreciation and amortization 92,702,208 – –28,499 – – 92,673,709Capital expenditure 4,664,522,562 34,395,787 132,337,688 2,321 – 4,831,258,358

2. Segment report in 2009

Railway Electricity

Coal mining transportation power and Undistributed Inter-segment

Items business business methanol items elimination Total

Operating revenue 20,966,827,328 329,014,547 1,183,449,657 38,596,273 1,017,535,590 21,500,352,215 – External 20,625,934,575 267,345,508 605,024,986 2,047,146 – 21,500,352,215 – Inter-segment 340,892,753 61,669,039 578,424,671 36,549,127 1,017,535,590 –

Operating cost and expenses 15,087,364,707 440,846,552 1,353,946,052 30,353,582 817,947,495 16,094,563,398 – External 11,333,105,739 243,957,310 643,027,603 126,445 – 12,220,217,097 – Inter-segment 272,714,203 58,615,123 462,739,736 23,878,433 817,947,495 – – Operating expense during the period 3,481,544,765 138,274,119 248,178,713 6,348,704 – 3,874,346,301

Total operating profit 5,879,462,621 –111,832,005 –170,496,395 8,242,691 199,588,095 5,405,788,817

Total assets 64,871,329,719 690,172,392 5,437,059,985 45,649,324 8,791,862,703 62,252,348,717Total liabilities 34,891,099,125 85,694,766 3,207,179,213 24,182,296 4,415,303,079 33,792,852,321Complementary informationDepreciation and amortization 1,324,173,119 91,623,484 274,927,977 2,008,608 – 1,692,733,188Non-cash expenses excluding depreciation and amortization –12,841,705 – –792,581 – – –13,634,286Capital expenditure 20,209,965,767 13,143,981 1,063,679,848 6,286,245 – 21,293,075,841



XIV. OTHER IMPORTANT EVENTS

1. Mining rights

According to the Mining Rights Agreement signed between the Company and the Group in October, 1997 and

supplementary agreement signed in February, 1998, an annual fee as compensation for mining rights of five coal

mines owned by the Yankuang Group is RMB12.98 million which is subject to new regulations after a ten-year

period if they come out.

Pursuant to Implement Scheme about Experimental Units of Coal Mining Rights Paid which was approved by the

State Council and jointly issued by the Ministry of Finance, State Resources Department and Development and

Reformation Committee in September, 2006, despite free mining rights developed and invested by the country,

enterprises should pay mining price on the base of reevaluation on remaining resource reserves. Shandong

Province is one of the experimental provinces carrying paid mining rights. By the reporting day, the Company

has been making assessment on remaining reserves. Pursuant to decision made in the sixth meeting of the Fourth

Session of the Board, compensation fee of RMB5 is accrued at per ton raw coal minded for the five coal mines

owned by the Company since January 1, 2008, which is subject to detailed scheme when it comes out. RMB137.07

million was accrued according to this criterion for the year of 2009. RMB140.71 million has been accrued

according to this criterion for the year of 2010.

2. Financial lease

As at December 31, 2010, financial lease of the Group details in Note “VIII.11”, minimum lease payments details

stated in Note XI.2, the balance of unconfirmed financing expenses is RMB228.76 million.

3. Assets and liabilities measured by fair values

Gain or loss Accumulative from change change of Accrued At of fair value fair value impairment At January for the charged in for the December 31,Items 1, 2010 current year equity current year 2010

Financial assetsTradable financial assets- hedging instrument 37,760,077 – 129,711,617 – 239,475,434 Available for sales financial assets 264,672,846 – –65,452,635 – 194,259,526

Subtotal 302,432,923 – 64,258,982 – 433,734,960

Financial liabilitiesTradable financial liabilities- hedging instrument 28,332,821 – 106,106,021 – 166,177,927

Subtotal 28,332,821 – 106,106,021 – 166,177,927



XIV. OTHER IMPORTANT EVENTS (continued)

4. Financial assets and liabilities of foreign currency

Gain or loss Accumulative from change change of Accrued At of fair value fair value impairment At January for the charged in for the December 31,Items 1, 2010 current year equity current year 2010

Financial assetsBank balance and cash 2,243,140,474 – – – 3,086,208,903Tradable finance assets- hedging instrument 37,760,077 – 129,711,617 – 239,475,434Loans and receivables 605,132,897 – – – 819,265,506Available for sales Financial assets 864 – 58 – 947

Subtotal 2,886,034,312 – 129,711,675 – 4,144,950,790

Financial liabilitiesTradable finance liabilities- hedging instrument 28,332,821 – –10,382,046 – 15,528,284Others financial liabilities 23,592,323,043 – – – 23,431,131,489

Subtotal 23,620,655,864 – –10,382,046 – 23,446,659,773

5. Additional conditions for the acquisition of Felix

On 23 October 2009, the Treasury of the Australian government announced that the Assistant Treasurer of

Australia has conditionally approved the Transaction.

(1) Operate its Australian mines through Yancoal Australia, which is managed in Australia using a

predominately Australian management and sales team;

(2) Ensure Yancoal Australia, and any of its operating subsidiaries, have at least two directors whose principal

place of residence is in Australia, one of whom will be independent of the Company;

(3) Ensure that the Chief Executive Officer and Chief Financial Officer of Yancoal Australia have their principal

place of residence in Australia;

(4) Hold the majority of Yancoal Australia’s board meetings in Australia in any calendar year;



XIV. OTHER IMPORTANT EVENTS (continued)

5. Additional conditions for the acquisition of Felix (continued)

(5) List Yancoal Australia on ASX prior to the end of 2012 and, by that time, reduce the Company’s

shareholding of Yancoal Australia to no more that 70%. In addition, as several of the mines operated by Felix

are owned by joint ventures with third party companies, following the listing and shareholding reduction

in Yancoal Australia, the Company’s economic ownership of the underlying mining assets must stand at

no more than 50%. In the event of potential non-performance by the Company as a result of economic

conditions or other factors, the Company is required to seek the approval of the Assistant Treasurer of

Australia for amending the aforesaid undertakings; and

(6) Market all coal produced at its Australian mines on arms-length terms with reference to international

benchmarks and in line with market practices.

6. Pursuant to “Temporary Management Measurements for Deposit of Shandong Province Mine Geological

Environment Restoration” and respective regulations issued by the Shandong Province Finance Bureau and

Shandong Province Land resource Bureau, the mining rights owners shall implement obligation of mine

environment restoration and hand in geological environment restoration deposit. The interests and principal of

the deposit shall be returned to the mining rights owners after the acceptance of such restorations. In accordance

with the provisions of such regulation, the Company and the subsidiary Heze Neng Hua shall hand in the deposit

of RMB1,076.36 million and RMB903.19 million before the expiration of mining rights. By the end of the period,

the Company and the subsidiary Heze Neng Hua have handed in RMB200 million and RMB22 million.

7. Pursuant to the decision in the eleventh meeting of the Fourth Session of the Board on December 30, 2010,

the Company made a resolution to use own capital for investing AUD909 million to the subsidiary of Yancoal

Australia Pty Ltd, the registration capital of which was increased to AUD973 million from AUD64 million. As at

the reporting date, the adding capital process has not been completed.



XV. NOTES TO STATEMENTS OF FINANCIAL STATEMENTS OF THE PARENT COMPANY


(1) Accounts receivable category

At December 31, 2010 At January 1, 2010 Book balance Bad debt Provision Book balance Bad debt Provision Amount % Amount % Amount % Amount % RMB RMB RMB RMB

Accounts receivables accrued bad debt provision as per portfolio – – – – – – – –Accounting aging portfolio 42,247,450 51 5,227,650 100 28,368,443 88 4,332,779 100Risk-free portfolio 40,000,000 49 – – 3,997,026 12 – –The subtotal of portfolio 82,247,450 100 5,227,650 100 32,365,469 100 4,332,779 100

Total 82,247,450 100 5,227,650 100 32,365,469 100 4,332,779 100

1) There was no the individually significant amounts of accounts receivables accrued the bad debt

provision separately for the period.

2) Accounts receivables in the portfolio accrued the bad debt provisions as per accounting aging analysis

method.

At December 31, 2010 At January 1, 2010Items Amount Bad debt Amount Bad debt RMB % provision RMB % provision

Within 1 year 37,609,578 4 1,504,383 25,037,150 4 1,001,4861 to 2 years 1,306,579 30 391,974 – 30 –2 to 3 years – 50 – – 50 –Over 3 years 3,331,293 100 3,331,293 3,331,293 100 3,331,293

Total 42,247,450 — 5,227,650 28,368,443 — 4,332,779




(continued)

1. Accounts receivable (continued)

(1) Accounts receivable category (continued)

3) Accounts receivables in the portfolio accrued bad debt provision under other method

Carrying Bad debt Item amount amount

Risk-free portfolio 40,000,000 –

Total 40,000,000 –

Note: AS of the end of the year, all risk-free portfolios are letters of credit issued by banks.

(2) Accounts receivable due from shareholders of the Group holding more than 5% (including 5%) of the total

shares are not included for the period.

(3) The five largest accounts receivables

Relationship Proportion with the of total accountsCompany name Company Amount Aging receivables (%)

Letter of credit of Third party 40,000,000 Within 1year 49 Shandong Jinneng Coal Gasification Co., Ltd.Baoshan Iron & Third party 37,409,578 Within 1year 45 Steel Co., LtdGuangzhou Suitong Third party 1,439,726 Over 3 years 2 Material company Yanzhoushi Anqiufu Depot Third party 1,306,579 1 to 2 year 2Yanzhou Mining Third party 1,089,956 Over 3 years 1 Bureau Jining Coal Sales Co.

Total 81,245,839 99




(continued)


(1) Other receivables category

At December 31, 2010 At January 1, 2010 Carrying amount Bad debt Provision Carrying amount Bad debt ProvisionItem RMB % RMB % RMB % RMB %

Accounts receivables accrued bad debt provision as per portfolio – – – – – – – –Accounting aging portfolio 17,495,686 1 13,850,609 100 31,001,410 8 20,166,663 100Risk-free portfolio 3,415,539,981 99 – – 338,727,860 92 – –The subtotal of portfolio 3,433,035,667 100 13,850,609 100 369,729,270 100 20,166,663 100

Total 3,433,035,667 100 13,850,609 100 369,729,270 100 20,166,663 100

1) There was no the individually significant amounts of other receivables accrued the bad debt provision

separately for the reporting period.

2) Other receivables in the portfolio accrued the bad debt provisions as per accounting aging analysis

method.

At December 31, 2010 At January 1, 2010Items Amount Bad debt Bad debt RMB % provision Amount % provision

Within 1 year 82,892 4 3,316 6,387,175 4 255,4871 to 2 year 5,010,931 30 1,503,279 3,206,890 30 962,0672 to 3 years 115,698 50 57,849 4,916,473 50 2,458,237Over3 years 12,286,165 100 12,286,165 16,490,872 100 16,490,872

Total 17,495,686 – 13,850,609 31,001,410 – 20,166,663

3) Other receivables in the portfolio accrued bad debt provision under other method

Carrying Bad debt Item amount amount

Risk-free portfolio 3,415,539,981 –

Total 3,415,539,981 –

Note: As of the end of the year, risk-free portfolio included RMB3, 125.75 million of prepayment for investment.




(continued)


(2) Other receivables written-off during the year

Nature of other Amount Reason connected Items receivables wrote-off wrote-off transaction

Personal and third- borrowings, etc 37,221 unable to recover No party companies during long period

Total 37,221

(3) As at December 31, 2010, the account receivables due from parent company of the Company were

RMB16.89 million (RMB10.9 million at December 31, 2009).

(4) The five largest other receivables

Proportion Relationship with of other Nature orItems the Company Amount Age receivables (%) contents

Prepayment of investment Third party 2,045,752,800 Within 1 year 60 Investment amountsYanzhou Coal Ordos Neng Holding subsidiary 1,080,000,000 Within 1 year 31 Investment Hua Company Limited amounts Yancoal Australian Pty Ltd Holding subsidiary 100,852,254 Within 1 year 3 Dealing amountsShanxi Hesun Tianchi Holding subsidiary 49,365,575 Within 1 year 1 Materials Energy Co., LtdYanzhou Coal Yulin Holding subsidiary 31,499,468 Within 1 year 1 Materials Neng Hua Co., Ltd

Total 3,307,470,097 96

(5) Other receivables due from related parties were RMB1,315.31million as at 31 December 2010, accounting for

38% of other receivables.

(6) Foreign currency balance in other receivables

At December 31, 2010 At January 1, 2010 Original Exchange RMB Original Exchange RMBItem currency rate equivalent currency rate equivalent

USD 15,215,675 6.6227 100,768,851 31,721,106 6.8282 216,598,056

Total 100,768,851 216,598,056




(continued)

3. Long-term equity investment

(1) Long-term equity investment


Long-term equity investments under cost method 6,348,640,546 4,849,080,546Long-term equity investments under equity method 1,074,958,369 939,981,410

Long-term equity investments – Total 7,423,598,915 5,789,061,956Less: provision for impairment – –

Long-term equity investments – net 7,423,598,915 5,789,061,956

(2) Under cost method and equity method

Ratio Shares of voting Original Opening Closing CashName of investees proportion share amount balance Additions Decrease Balance dividends

Under cost methodQingdao Zhongyan 52.38 52.38 1,100,000 2,709,904 – – 2,709,904 238,117Yanmei Shipping 92.00 92.00 3,430,000 10,575,733 – – 10,575,733 1,927,860Heze Neng Hua 98.33 98.33 1,450,000,000 1,424,343,542 1,500,000,000 – 2,924,343,542 –Yancoal Australia Pty 100.00 100.00 403,281,954 403,281,954 – – 403,281,954 –Yulin Neng Hua 100.00 100.00 776,000,000 1,400,000,000 – – 1,400,000,000 –Shanxi Neng Hua 100.00 100.00 600,000,000 508,205,965 – – 508,205,965 –Ordos NengHua 100.00 100.00 500,000,000 500,000,000 – – 500,000,000 –Hua Ju Energy 95.14 95.14 599,523,447 599,523,448 – – 599,523,448 29,103,817Zhejiang Jiangshan Concrete Co., Ltd 0.489 0.489 440,000 440,000 – 440,000 – –

Subtotal 4,333,775,401 4,849,080,546 1,500,000,000 440,000 6,348,640,546 31,269,794Under equity method China HD Zouxian Co., Ltd. 30.00 30.00 900,000,000 939,981,410 7,874,551 – 947,855,961 –Yankuang Group Finance Co., Ltd 25.00 25.00 125,000,000 – 127,102,408 – 127,102,408 –

Subtotal 1,025,000,000 939,981,410 134,976,959 – 1,074,958,369 –

Total 5,358,775,401 5,789,061,956 1,634,976,959 440,000 7,423,598,915 31,269,794




(continued)

3. Long-term equity investment (continued)

(3) Investment in associates

Type of Registered Business Registered Shares Ratio ofName of investees enterprise location nature capital proportion voting share

China HD Zouxian Limited liability Tangcun, Zoucheng Electricity power resources and RMB3 billion 30% 30% Co., Ltd. Shandong related development, production, investment, sales and constructionYankuang Group Limited liability Shandong Finance RMB500 million 25% 25% Finance Co., Ltd

(continued)

Total assets Total liabilities Net assets Operating Net profit by the end by the end by the end income for the for theName of investees of the period of the period of the period current year current year

China HD Zouxian Co., Ltd. 6,486,343,756 3,326,823,887 3,159,519,869 4,226,931,709 22,558,501Yankuang Group Finance Co., Ltd 6,144,686,416 5,636,276,785 508,409,631 12,443,120 8,409,632

Total 12,631,030,172 8,963,100,672 3,667,929,500 4,239,374,829 30,968,133

(4) No impairment occurred in long-term equity investment of the Company, so there is no provision.

4. Operation revenue and operation cost

Items 2010 2009

Principal operations revenue 25,828,062,184 18,887,147,686Other operations revenue 1,146,309,513 847,663,719

Total 26,974,371,697 19,734,811,405

Principal operations cost 13,039,830,842 10,124,573,977Other operations cost 1,328,710,524 978,432,154

Total 14,368,541,366 11,103,006,131




(continued)

4. Operation revenue and operation cost (continued)

(1) Principal operations – Classification by business

2010 2009 Operation Operation Operation OperationItems revenue cost revenue cost

Coal mining 25,314,780,279 12,729,167,721 18,619,802,178 9,880,616,667Other 513,281,905 310,663,121 267,345,508 243,957,310

Total 25,828,062,184 13,039,830,842 18,887,147,686 10,124,573,977

(2) Principal operations – Classification by product

2010 2009 Operation Operation Operation OperationItems revenue cost revenue cost

Revenue from domestic sales of coal products 21,315,082,592 8,768,525,494 17,456,556,035 8,776,238,470Revenue from export sales of coal products 9,739,121 5,039,022 50,743,647 26,840,571Sales of coal purchased from other companies 3,989,958,566 3,955,603,205 1,112,502,496 1,077,537,626Revenue from railway transportation services 513,281,905 310,663,121 267,345,508 243,957,310

Total 25,828,062,184 13,039,830,842 18,887,147,686 10,124,573,977

(3) Principal operations – Classification by area

2010 2009 Operation Operation Operation OperationArea revenue cost revenue cost

Domestic 25,818,323,063 13,034,791,821 18,836,404,039 10,097,733,406International 9,739,121 5,039,021 50,743,647 26,840,571

Total 25,828,062,184 13,039,830,842 18,887,147,686 10,124,573,977

(4) Total sales amount of the 5 largest customers in 2010 is RMB8,036.66 million, which accounts for 31% in

total revenue.




(continued)

5. Investment income

(1) Sources of investment income

Items 2010 2009

Long-term equity investment income under cost method 31,269,794 2,599,008 Long-term equity investment income under equity method 8,869,958 109,786,300 Investment income from disposal of long-term equity investment 160,000 –Investment income of entrust loan 74,282,873 253,967,854 Investment income of AFS financial assets 4,504,096 2,287,590

Total 119,086,721 368,640,752

(2) Long-term equity investment income under equity method

Reason of changeItem 2010 2009 Increase of loss

Total 8,869,958 109,786,300Including:China HD Zouxian Co., Ltd. 6,767,550 109,786,300 HD Zouxian current profit decreased.Yankuang Group Finance Co., Ltd 2,102,408 – Newly increased

(3) There is no major limit on recovery of investment income to the Group.




(continued)

6. Supplement information of cash flow statement of the parent company

Items 2010 2009

1. Reconciliation of net profit to net cash flow from operating activities

Net profit 6,548,575,685 4,200,260,201Add: Provision of impairment of assets 177,519,590 –14,906,867 Depreciation of fixed assets 1,052,288,203 1,216,494,542 Amortization of intangible assets 17,010,107 20,011,648 Amortization of long-term deferred expenses 625 – Special reserves accrued 479,940,003 467,032,328 Losses on disposal of fixed assets, intangible and other long-term assets (“-” represents gain) –605,405 –3,828,547 Financial expenses (“-” represents gain) 29,226,741 2,611,332 Loss arising from investments (“-” represents gain) –119,086,721 –368,640,752 Influence of deferred taxes assets(“-” represents increase) –389,479,353 –321,893,907 Decrease in inventories (“-” represents increase) –346,067,777 298,985,093 Decrease in receivables under operating activities (“-” represents increase) –8,653,921,671 –988,614,615 Increase in payables under operating activities (“-” represents decrease) 5,472,628,873 1,267,595,839 Net cash flow from operating activities 4,268,028,900 5,775,106,295

2. Changes in cash and cash equivalents:Cash, closing 5,336,180,576 6,724,043,764Less: Cash, opening 6,724,043,764 8,221,690,516Net addition in cash and cash equivalents –1,387,863,188 –1,497,646,752

XVI. SUPPLEMENT

1. Reconciliation for differences of net profits and net assets

Equity attributable to Net profit attributable toItems parent company shareholders parent company shareholders At 31 December At 1 January

2010 2009 2010 2009

As per the financial statements prepared under IFRS 37,331,886,252 29,151,807,830 9,281,385,606 4,117,321,7861) Business combination adjustment under common control (note 1) –642,100,925 –647,023,996 6,053,463 6,053,4632) Special reserves (note 2) –610,766,370 –698,387,903 –369,554,674 –280,683,9553) Deferred tax effect (note 3) 648,135,011 571,040,185 70,282,901 48,664,8304) Others –5,434,720 –19,650,693 20,453,931 –11,026,795As per PRC ASBEs 36,721,719,248 28,357,785,423 9,008,621,227 3,880,329,329



XVI. SUPPLEMENT (continued)

1. Reconciliation for differences of net profits and net assets (continued)

(1) Pursuant to CASs, when relevant assets and subsidiaries purchased from Yankuang Group come into

combination with enterprises under the common control, assets and liabilities of acquiree should be

measured based on book value on the date of acquisition. The difference of book value of net assets acquired

by the Company and consolidation price paid was adjusted as capital reserves. While pursuant to IFRS,

acquirees recognize identifiable assets, liabilities and contingent liabilities according to the fair value on the

date of acquisition. When the cost of a business combination exceeds the acquirer’s interest in the fair value

of the acquiree’s identifiable asset, liabilities and contingent liabilities, the difference shall be recognized as

goodwill.

(2) As stated in Note IV.20, in accordance with relevant regulations of the Chinese authorities, the company

has to accrue for special reserve like Weijianfei, Work Safety expenses etc, which are presented in cost of

expenses of the period and the amount that has been accrued but not used are presented in special reserve

of owner’s equity. Fixed assets purchased with special reserve, are presented in related assets and full

amount carryover accumulated depreciation. On the basis of IFRS, expenses are confirmed when it occurs

in the period, and relevant capital expenditures are confirmed as fixed assets when occurs and depreciated

following corresponding depreciating method.

(3) The differences between the above mentioned standards bring differences in tax and influence of minority

equity.

2. Extraordinary gain

Pursuant to Explanation to Information Disclosure and Presentation Rules for Companies Making Public Offering

No.1 Extraordinary Gain, extraordinary gains of the Company are as follows:

Items 2010 2009

Gain and loss from disposal of non current assets –18,429,446 –11,841,307Government subsidies included in the gains and losses of the period 43,272,983 29,839,242Investment income from available for sales financial assets 4,504,096 2,287,590Gains and losses from entrusted loam – –Other net non-business revenues and expenses excluding the above items –15,115,417 –12,611,104

Subtotal 14,232,216 7,674,421Income tax effect 3,328,033 4,976,898Extraordinary gain excluding income tax effect 10,904,183 2,697,523Including: attributable to shareholders of the parent company 10,167,144 2,151,435

Minority interest effect(after tax) 737,039 546,088



XVI. SUPPLEMENT (continued)

3. Return on net assets and earnings per share

Pursuant to Information Disclosure and Presentation Rules for Companies Making Public Offering No.9

computation and disclosure of Return on net assets and earnings per share Issued by China Securities Regulatory

Commission, the weighted average return on net assets and earnings per share of the Company are as follows:

Earnings per share Weighted Basic DilutedProfit during average return earnings earningsthe report period on net assets (%) per share per share

Net profit attributable to shareholders of the parent company 27.60 1.8316 1.8316Net profit attributable to shareholders of the parent company, excluding extraordinary gain 27.57 1.8295 1.8295

XVII. APPROVE OF FINANCIAL STATEMENTS

The financial statements have been approved by board of directors on March 25, 2011.


25 March 2011


Chapter 15Documents Available for Inspection

The following documents are available for inspection at the office of the secretary to the Board at 298 Fushan South Road,

Zoucheng, Shandong Province, the PRC:

1. Completed financial statements of the Company with the corporate seal affixed and signed by the legal representative,

person responsible for accounting work and responsible person of the accounting department;

2. Original of auditors’ report sealed and signed by the Certified Public Accountants;

3. All documents and announcements published during the reporting period in newspapers designated by the CSRC; and

4. The full text of the annual report released in other securities markets.

On behalf of the Board

Li Weimin

Chairman


25 March 2011


AppendixDATA OF COAL MINES OF YANZHOU COAL

Xinglong

Nantun zhuang Baodian Dongtan Jining II Jining III Total

Background Data:

Commencement of construction 1966 1975 1977 1979 1989 1993 N/A

Commencement of commercial

production 1973 1981 1986 1989 1997 2000 N/A

Coal field (square kilometer) 35.2 59.81 36.4 60.0 87.1 105.1 383.61

Reserve Data:

(million tonnes as of 31 December 2009)

Total in-place proven and

probable reserve 118.20 326.13 288.36 457.47 413.42 227.54 1,831.2

Recovery rate (%) 80.75 80.58 82.57 84.02 65.27 81.59 N/A

Type of coal thermal thermal thermal thermal thermal thermal N/A

coal & PCI coal & PCI coal & PCI coal & PCI coal & PCI coal & PCI

coal coal coal coal coal coal

Production Data (million tonnes)

Designed raw coal production

capacity 2.4 3.0 3.0 4.0 4.0 5.0 21.4

Designed

washing capacity 1.8 3.0 3.0 4.0 3.0 5.0 19.8

Raw coal production

1997 3.9 4.1 4.0 4.9 0.8 _ 17.7

1998 4.2 5.0 4.3 5.4 1.8 _ 20.7

1999 4.0 6.1 4.7 6.1 3.2 _ 24.1

2000 4.5 6.2 5.3 6.7 4.8 _ 27.5

2001 4.9 6.6 6.2 7.1 4.1 5.1 34

2002 3.6 7.1 6.4 8.1 5.2 8.0 38.4

2003 4.7 7.0 7.3 8.2 6.0 10.1 43.3

2004 4.1 7.4 7.0 8.5 4.9 7.3 39.2

2005 4.0 6.6 5.0 7.5 4.5 7.0 34.6

2006 3.9 7.2 5.6 8.0 4.0 6.8 35.5

2007 3.9 6.8 5.8 7.6 3.4 5.3 32.8

2008 3.5 6.6 6.0 7.0 3.9 6.1 33.1

2009 3.8 6.6 5.7 7.5 3.6 6.2 33.4

Note: The above reserve data is based on the relevant information from the report of independent mining consultants and/or the operating

data derived from the Company’s record. Total proven and probable reserves are reported after deduction of actual production

volume and non-accessible reserves up to 31 December 2010. Non-accessible reserves are defined as the portion of identified resources

estimated to be not accessible by application of one or more accessibility factors within an area. The report of the independent mining

consultants for Nantun, Xinglongzhuang, Baodian, Dongtan and Jining II was issued by International Mining Consultants Limited,

Nottinghamshire, United Kingdom on 6 February 1998, and the Report for Jining III was issued by SRK Consulting in August 2000.


Appendix

DATA OF SHANXI NENG HUA AND HEZE NENG HUA

Tianchi Zhaolou Total

Background Data:

Commencement of construction 2004 2004 N/A

Commencement of commercial production 2006 2009 N/A

Coalfield(square kilometer) 20.0 143.36 163.36

Reserve Data:


Recoverable reserve 26.71 105.00 131.71

Recovery Rate 80.04 78.71 N/A

Type of coal Thermal 1/3 coking coal N/A

Production Data (million tones)

Designed raw coal production capacity 1.2 3.0 4.2

Designed raw coal preparation input washing capacity — — —

Raw coal production

2006 0.1 — 0.1

2007 1.2 — 1.2

2008 1.1 — 1.1

2009 1.0 0.4 1.4

2010 1.5 1.6 3.1


data derived from the Company’s record. Recoverable reserves are reported after deduction of actual production volume and non-

accessible reserves up to 31 December 2010. Non-accessible reserves are defined as the portion of identified resources estimated to be

not accessible by application of one or more accessibility factors within an area. The report of the independent mining consultant for

Shanxi Neng Hua coal mine and Heze Neng Hua coal mine was issued by Minarco Asia Pacific Pty Limited in May 2006.


Appendix

DATA OF YANCOAL AUSTRALIA PTY

Austar Yarrabee Minerva Ashton Moolarben Athena Harry-brandt Wilpeena Total

Background Data

Commencement of construction 1998 1981 2004 2003 2009 N/A N/A N/A N/A

Commencement of commercial

production 2000 1982 2005 2004 2010 N/A N/A N/A N/A

Coalfield area (square kilometer) 63 62.71 15.6 19.21 17.4 782.73 40.4 34.65 1035.7

Reserve Data:


Resources rate 167 171.16 76.04 437.27 701.3 53.7 97.2 27.2 1730.87

Recoverable reserve 50.9 60.29 23.61 60.8 351.7 N/A N/A N/A 547.3

Semi-hard PCI Semi-soft Anthracite PCI

Type of coal coking coal coal Thermal coal coking coal Thermal coal Thermal coal coal coal N/A

Production Data (million ones)

Designed raw coal production

capacity 3.6 3.0 2.8 5.2 16.0 — — — 30.6

Designed raw coal preparation

input washing capacity 3.3 2.4 N/A 6.5 16.0 — — — 28.2

Raw coal production

2006 0.4 — — — — — — — 0.4

2007 1.6 — — — — — — — 1.6

2008 1.9 — — — — — — — 1.9

2009 1.9 — — — — — — — 1.9

2010 1.7 2.3 1.4 2.7 3.9 — — — 12.0


data derived from the Company’s record. Recoverable reserves are reported after deduction of actual production volume and non-

accessible reserves up to 31 December 2010. Non-accessible reserves are defined as the portion of identified resources estimated to be

not accessible by application of one or more accessibility factors within an area.

ANNUAL REPORT

(a joint stock limited company incorporated in the People’s Republic of China with limied liability)

2010

AN

NU

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2010